Finance Bill 2024: Union Finance Minister Nirmala Sitharaman on Wednesday said that the government has successfully brought in a simplified tax structure. While replying to the discussion on the Finance Bill in Lok Sabha, FM Sitharaman said that the claim that corporate taxes are lower than the individual taxes claim is not well founded.
While replying to the Opposition’s claims that the government that the government has ignored middle-class taxpayers, FM Sitharaman said the effective tax on annual income of Rs 15 lakh was reduced to 10 per cent in 2023 and further reduced this year as well under the new I-T regime.
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“Corporate taxes are lower than the individual taxes claim is not well founded. It is not based on facts. One should note that the corporates are legal entities. The dividend income is also part of the profits. It was earlier taxed at a lower rate in the hands of the company. In 2020, we started taxing it at the hands of shareholders at the applicable rate. This effectively meant the richer shareholders would pay tax on dividends at 39% rate. In contrast, small and medium-income taxpayers will pay tax on dividends at even less than 10%, which is the effective tax rate. Therefore, the argument that you burden the middle-class taxpayers by supporting only big corporations is not true.”
Incoming amendment to LTCG tax
Talking about the latest amendment to LTCG tax, FM Sitharaman said that the incoming amendment would entail land and building assets purchased by individuals and HUFs before July 23, 2024, would have the option to choose between the earlier indexation regime and newly proposed standard computation for calculating the long-term capital gains tax.
“Not only are we coming up with an option, we are asking them to calculate under both,” she stated, adding, “This ensures nobody faces additional tax burden.”
Earlier, putting a case for the proposed standard regime, the finance minister argued that it was “easy for computation, filing and keep record-keeping across asset classes”.
Taxation and regimes
She added: “Without drastically increasing taxes, we have brought in a simplified taxation regime, eased compliance.”
Comparing the two regimes, the finance minister said during AY 2023-24 (till December 31, 2023), 3.8% taxpayers opted for the New Tax Regime, which has simplified tax slabs. About 3.93 lakh individuals compared to a total of 7.98 lakh individuals who filed ITR 1 and 4, she added.
She further said the figure now stood at 72.8% – representing 5.25 crore taxpayers of a total of 7.22 crore. She argued there was a realisation among taxpayers than under the new regime, the new system benefits them, and they were paying less taxes.
She refuted assertions about savings not happening in the New Tax Regime. “Middle class losing out is not a correct argument. The new regime is promoting investment which is happening with investment in mutual funds have increased tremendously,” she stated.
The finance minister further enumerated that 17.88 new folios have been added every month in the last five years since 2019. She further stated unique investors are also growing. It rose from 1 crore in 2014 to 4 crore at present.
“The vision of PM Modi has been to establish a simple, efficient and fair technology-driven taxation regime in this country. So, simplification and ease of compliance for the taxpayer has been the primary objective with which in the last 10 years, and this year, in the third term of PM Modi, the approach to taxation has been to simplify it, reduce the burden on taxpayer and make sure it is transparent and Equitas,” said Sitharaman.