Finance Minister Nirmala Sitharaman made it clear that there will be no reduction in tax rates under the old regime, addressing calls from taxpayers for similar rate cuts to both old and new regimes.
The minister, who was speaking at a News18 event, clarified that the government is not forcing anyone to switch from the old to the new tax regime.
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“We are not compelling anyone to move,” she said, highlighting that over 78% of taxpayers have already opted for the new regime. This system was designed to simplify direct taxation and ease compliance for individuals.
Under the new regime, tax rates have been lowered, and the standard deduction has been increased to ₹75,000 to reduce the middle-class tax burden. However, the old regime remains unchanged in this regard.
“We brought the standard deduction into the new regime after listening to what people wanted,” Sitharaman noted.
Despite these adjustments, some middle-class taxpayers have expressed concerns, arguing that the rate cuts introduced in the new system should also be extended to the old regime.
Sitharaman acknowledged these sentiments but reiterated the government’s stance. “I understand the view that some rate reductions in the new system should apply to the old regime, but we have kept the changes specific to the new scheme,” she said.
The Finance Minister emphasized the government’s goal to streamline the tax system for all, including the middle class, with the intention of simplifying direct taxation further.
Sitharaman explained that the government has been working to simplify direct taxation since 2019. “The attempt has been to make the process simpler, which is why a new regime was brought in with lower rates. We gave the option to taxpayers that if they preferred exemptions, they could remain with the old scheme,” she said.
She also noted that while the new scheme initially offered no exemptions, the government later added standard deductions to accommodate taxpayer needs. “In the July budget, we revisited this and further reduced rates for the middle class, while also increasing the standard deduction,” Sitharaman added.