New slabs make I-T structure more equitable: Ajay Bhushan Pandey

NEW DELHI: The new income slabs announced in the budget are more equitable and have been devised after a careful study of the rate structure in several countries, revenue secretary Ajay Bhushan Pandey said. The study showed that fewer income tax slabs can lead to inequity, hitting low income taxpayers more, he said.

The number of slabs will increase to seven from four earlier.

“People say there should be one or two slabs but that would be highly inequitable... Rates would have to be steep if we have one or two slabs. The income tax structure has to be progressive,” Pandey told ET. “We studied slabs in developing countries, developed countries, neighbouring countries before these were worked out.”


The new regime, which is available to those who forego all exemptions and deductions, is optional. A taxpayer can choose to remain in the existing three-rate structure with exemptions and a peak rate of 30% for incomes over Rs 10 lakh.

Finance minister Nirmala Sitharaman has said that exemptions will eventually be scrapped and all taxpayers moved to the simpler regime.

Under the new rates, those with an annual income of up to Rs 15 lakh could make a tax saving of as much as Rs 78,000.

People with a lower income have to be taxed at a lower rate, Pandey said. Giving taxpayers the option of foregoing exemptions is a significant move toward a simpler tax regime, he said.

He rejected suggestions that the introduction of the new slabs would complicate things, making it difficult for taxpayers. He pointed out that Singapore has 11 slabs and China has seven with the highest rate at 45%.

IT-enabled tools such as pre-filled return forms would make it easy for taxpayers to file returns.

“System itself would show in the form their tax liability in the pre-filled forms,” he said.