To make the optional tax regime more appealing, allow deductions and raise the limit for peak 30% taxation: Experts 

To appeal to middle-income taxpayers, experts recommended that the limit for 30% tax be increased to 20 lakhs under the concessional income tax structure in Budget 2023–24 and investments in Public Provident Fund (PPF) and other tax savings programmes be allowed as deductions. 

The government introduced an optional income tax system in Budget 2020–21, under which individuals and Hindu Undivided Families (HUFs) would pay higher taxes if they took advantage of certain deductions and exemptions such as the house rent allowance (HRA), mortgage interest, and investments made under Sections 80C, 80D, and 80CCD. Up to 2.5 lakhs in total income will be tax-free under this.

According to experts, in order to make the optional tax system more appealing to taxpayers, Finance Minister Nirmala Sitharaman could consider integrating several common tax deductions requested by individuals as well as raising the basic exemption level and the peak tax rate limit.

This news is written by Ms. Pujari Dharani, Research Assistant, All India Legal Forum.