The Narendra Modi government’s attitude to income tax administration has been to go for stability in tax administration rather than keep tinkering it with rates and slabs for providing relief in response to the prevailing situation in a year. Accordingly, since 2024, when it was sworn in, the Modi government prioritised streamlining of the income tax framework and increasing compliance.
Some of the areas where the government emphasised included quicker dispute resolution mechanism avoiding the courts such as Vivad se Vishwas initiative, e-filing of income taxes, faceless assessment and appeals to increase transparency, simplification by adopting pre-filled returns and rate rationalisation.
New Income Tax regime: ‘The game changer’
The most significant income tax measure under the Modi government has been the introduction of the new tax regime. The mode of income tax filing changed drastically from FY21, when the government introduced the new tax regime, the key objective of which was to lower the tax rates and gradually do away with the plethora of income tax exemptions and deductions. “The emphasis of the new tax system was to gradually switch to a system with minimal deductions and a simple and lower income tax rate structure which will be both easier to administer and easier for the common person to understand,” said Income Tax Bar Association Calcutta secretary Himadri Mukhopadhyay. In fact, the new system has found a lot of takers and well over 70% of the Income Taxpayers have switched to the new system in 2024.
These measures have significantly pushed up direct tax collections. In 2013-14, the net direct tax collection figure for the Centre stood at Rs 6.38 lakh crore. It jumped to Rs 19.18 lakh crore, or more than 300% in 2023-24. There was a significant rise in the number of ITRs (Income Tax Returns) being filed in India. It rose to 8.09 crore in FY24 against 3.80 crore in FY14. However, one of the challenges for the government is to reduce the number of Nil ITRs — income tax returns which do not pay income tax, the number of which stood at a whopping 4.90 crore in FY24.
Income tax rates from 2014-2024
Data show us that the income tax rates for the year 2014-15 were as follows:
- 0 to Rs 2.5 lakh: NIL
- More than Rs 2.5 lakh to Rs 5 lakh: 10%
- More than Rs 5 lakh to Rs 10 lakh: 20%
- More than Rs 10 lakh: 30%
- The income tax rates for 2024-25 (new regime) are as follows:
- Income 0 to 3 lakh: NIL
- More than Rs 3 lakh to 7 lakh: 5% on income exceeding Rs 3 lakh
- More than Rs 7 lakh to Rs 10 lakh: Rs 20,000 + 10% of income above Rs 7 lakh
- More than Rs 10 lakh to Rs 12 lakh: Rs 50,000 + 15% of income above Rs 10 lakh
- More than Rs 12 lakh to Rs 15 lakh: Rs 80,000 + 20% of income above Rs 12 lakh
- More than Rs 15 lakh: Rs 1.4 lakh + 30% of income above Rs 15 lakh
The Narendra Modi government has endeavoured to bring stability to the income tax structure in India and has chosen to stabilise income tax rates, slabs and standard deductions rather than tinkering with the rates often. However, it has also made a few structural changes such as introduction of a new income tax system which marked by lower rates and very few exemptions. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
