In an interview to an eminent news channel, the top revenue officer said, that a tax-payer will not have to keep track of various investments made using saving instruments because the new system offers lower rate without any deductions.
As per the previous system, a person is required to keep evidence of various investments such as the premium paid for a life insurance policy or house rent receipts.
The Revenue Secretary said, "The taxpayers won't need the help of an expert in the new tax regime. People don't have to keep a track of how much money they have invested in PF, national saving certificates, medical insurance or some pension scheme. So, none of those things are required to be maintained."
However, Pandey added, the resultant benefits of the new structure varies Pandey said that those who know basic arithmetic can calculate their tax liability and file returns. He also said that in a new regime, a taxpayer with annual income of up to Rs 10 lakh and availing various benefits up to Rs 1.5 lakh under the old regime can be a gainer.
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So far as multiple slabs are concerned, in most parts of the world, especially developed nations like the US and Canada, there are 6-7 slabs of income and they are equitous, said top revenue official.
"If there is sudden jump in rates from 5 to 20 per cent, people just crossing the border and coming in the higher bracket have tendency to under-report income and come to a lower income. But if there is a gradual changes, there will not be much incentive to under-report," he said.
The Revenue Secretary has dissolved the claim by a section of tax experts that there would not be any incentive in the new tax system for saving. He said that options have been given to people,taking into consideration that saving behaviour depends on the demographics and at what stage of life a person is.
"Someone who is young and just joined the workforce, for the first few years, his requirements will be very different. And because he is getting less salary, he would like to receive cash in abundance because he has to buy household goods. Then he also has to think of expenditure because he is setting up his own establishment. He needs money to spend. He will find this system more beneficial. It might happen that once he is married and has a family, there will be a need for saving so he can switch to the old system. Now similarly a person who has crossed the age of 50 or a senior citizen or super senior citizen, they all don't need to put their savings in various schemes like pension and life insurance. In such cases they can take advantage of new system," Pandey said.
"The option of both old and new system gives lot of flexibility to people and widens their choice available to people," he added.
Finance Minister Nirmala Sitharaman on Saturday while presenting the Union Budget for FY21 has proposed to cut income tax rates and change slabs to lower tax incidence for those earning upto Rs 15 lakh a year. Accordingly, the Minister proposed a 10 per cent tax on income between Rs 5 and Rs 7.5 lakh from 20 per cent now.
Income between Rs 7.5 lakh to Rs 10 lakh will also attract a lower tax of 15 per cent. For annual income between Rs 10 lakh and Rs 12.5 lakh, the income tax rate has been reduced to 20 per cent from 30 per cent. Those earning Rs 12.5 lakh to Rs 15 lakh will pay 25 per cent tax. The Finance Minister said that those earning over Rs 15 lakh would continue to pay the tax at the current rate of 30 per cent. The new tax regime is optional and an individual taxpayer can opt for the structure that is beneficial for him.
A taxpayer opting for the lower tax regime would have to forgo all the deductions and exemptions availed by him in the old regime.