With the Budget 2020 announcing an optional income tax slab for individual income tax payers, the CBDT as clarified that individual tax payers can switch back n forth between the two options year by year. Which means that the income tax payer can opt to choose the no exemption – low tax slab option in one year and can move to legacy system the other year.
Business owners, however, will not have this flexibility.
“Let it be very clear that this is an optional scheme and there is no compulsion for the tax payer to move into the new slab. If you find the new scheme preferable, you can move to it and if you are better off in the existing system, stick with it. The only restriction in this case will be with persons who run a business,” said PC Mody, Chairman of the Central Board of Direct Taxes.
Reiterating a point that the Finance Minister Nirmal Sitharaman had made in her Budget speech on 1 February 2020, PC Mody said that the exemptions and deductions will be gradually phased out to make the tax structure simpler and easier to comply with.
Terming it to be an interesting proposition, Mody said that year by year options to shift options will allow a tax payer to benefit from exemptions in one year and benefit from lower tax slabs the other year.