Lok Sabha Question No. 2 (STARRED), answered on 2025-02-03
Subject: Tax Exemptions and Benefits
Ministry: FINANCE
Asked by: Ms Kangna Ranaut, Shri Suresh Kumar Kashyap

## GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE

## LOK SABHA STARRED QUESTION NO. *2

TO BE ANSWERED ON MONDAY, THE 03 rd  FEBRUARY, 2025/14 MAGHA, 1946 (SAKA)

## 'TAX EXEMPTIONS AND BENEFITS'

## *2. MS. KANGNA RANAUT: SHRI SURESH KUMAR KASHYAP:

Will the Minister of FINANCE be pleased to state: -

- (a) the  distribution  of  tax  exemptions  and  benefits  between  corporations  and  individual taxpayers during the last five years;
- (b) the specific policies or measures that have been implemented by the Government to ensure that the middle-class is benefited more from tax exemptions; and
- (c) the details of estimated impact of these measures on middle-class taxpayers?

## ANSWER

## THE MINISTER OF FINANCE

## (SMT. NIRMALA SITHARAMAN)

- (a) to (c): A statement is laid on the Table of the House.

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STATEMENT REFERRED TO IN REPLY TO PARTS (a) TO (c) IN RESPECT OF LOK SABHA STARRED QUESTION NO. *2 FOR REPLY ON 03.02.2025 REGARDING 'TAX EXEMPTION  AND  BENEFITS'  ASKED  BY  Ms.  KANGNA  RANAUT  AND  SHRI SURESH KUMAR KASHYAP.

- (a) the  distribution  of  tax  exemptions  and  benefits  between  corporations  and  individual taxpayers during the last five years;

## Reply:

- (i) The direct tax policy through Income-tax Act,1961 ('the Act'), inter alia , provides for tax incentives to promote exports; balanced regional development; creation of infrastructure facilities; employment; rural development; scientific research and development;  cooperative  sector,  encourage  savings  by  individuals  and  donations  for charity.  The  revenue  impact  of  major  tax  incentives  due  to  tax  exemptions  and  benefits under the Act in respect of corporates and Individuals/HUFs from FY 2019-20 to FY 202324 are tabulated as under:

Table 1: Revenue impact of major tax incentives

| Financial Year   | For Corporates (in Rs Crore)   | For Individuals/HUFs (in Rs Crore)   |
|------------------|--------------------------------|--------------------------------------|
| 2019-20          | 94,109.83                      | 1,55,429.45                          |
| 2020-21          | 75,218.02                      | 1,28,244.23                          |
| 2021-22          | 96,892.39                      | 1,68,566.30                          |
| 2022-23          | 88,109.27                      | 1,96,678.95                          |
| 2023-24*         | 98,999.57                      | 2,20,988.47                          |
| Total            | 4,53,329.08                    | 8,69,907.40                          |

Source: Receipt Budget of respective years

*Total Revenue Impact for FY 2023-24 is projected revenue impact.

- (ii)     The total revenue impact of major tax incentives for Individual/HUF taxpayers for last five years  is Rs  8,69,907.40 Crores.  In  comparison,  the  total  revenue  impact  of  major  tax incentives for corporate taxpayers for last five years is Rs 4,53,329.08 Crores. Therefore, it can be seen that the government has foregone huge revenue benefiting Individuals/HUFs taxpayers.
- (b)  the specific policies or measures that have been implemented by the Government to ensure that the middle-class is benefited more from tax exemptions; and

Reply: The New tax regime was introduced in the Budget 2020-21 to simplify, reduce and make it easy for complying with income tax provisions and also to provide significant relief to the middle-class taxpayers. About 75% of taxpayers have opted for the New tax regime.  It  is  highlighted  that one  of  the  objectives  of  proposals  regarding  Direct  taxes presented in the Budget 2025 is personal income tax reforms with special focus on middle class  taxpayers.  Some  of  the  measures  that  would  benefit  middle  class  taxpayers  are discussed as under.

-  Increase in basic exemption limit: Under the New tax regime introduced in the Budget 2020-21, the threshold total income limit exempt from income-tax i.e.  'Nil'  income tax slab was upto Rs. 2.5 lakh, which was increased to Rs.3 lakh in the Budget 2023-24 and also now proposed to be increased to Rs.4 lakh in the Budget 2025-26.
-  Rebate u/s 87A: In the Budget 2023-24, the income tax rebate limit was made applicable  in  the  new  tax  regime. Accordingly,  resident  individual  with  total income up to Rs.7 lakh do not pay any income tax due to rebate under the new tax regime. In the Budget 2025-26 presented on 01 st Febrauary,2025, it has been proposed to further increase the rebate for the resident individual under the new tax regime so that they do not pay tax if their total income is up to Rs. 12 lakh (other  than  the  special  rate  income).  By  increasing  this  limit  to  Rs.12  lakh, around one crore taxpayers who were earlier required to pay tax varying from Rs.20,000  to  Rs.80,000  will  be  now  paying  'Nil'  tax.  This  limit  will  be  Rs. 12.75  lakh  for  salaried  tax  payers,  due  to  standard  deduction  of  Rs.  75,000. Marginal relief as provided earlier under the new tax regime is also applicable for income marginally higher than Rs. 12 lakh.
-  Reduction in Income tax rates: There is a continuous decrease in the personal income  tax  rates  in  various  income  slabs  since  the  introduction  of  new  tax regime in the Budget 2020-21. It has been proposed in the current Budget 202526 that the higher tax rate @30% will be made applicable to total income above Rs.24  lakh.  Details  of  income  tax  rates  slab-wise  announced  in  the  Budget 2020-21, Budget 2023-24, Budget 2024-25 (July,2024) and Budget 2025-26 are provided in the Annexure A.
-  Increase in Standard deduction Limit: In  the  Budget  2023-24, the standard deduction of Rs 50,000/- was made available to the salaried persons opting for new tax regime. This limit was increased to Rs.75,000/- in the Budget 2024-25 (July,2024). Similarly, deduction on family pension for pensioners was enhanced  from  Rs.15,000/-  to  Rs.25,000/-in  the  Budget  2024-25(July,2024). This has provided relief to about four crore salaried individuals and pensioners.
-  Exemptions under New Tax regime: Taxpayers opting for  New Tax regime can  also  avail  benefit  of  certain  exemptions  which  inter-alia  include  leave encashment  upto  Rs.25  lakh,  increased  deduction  of  employers  contribution under NPS, some allowances received by salaried persons like daily allowance, conveyance allowance etc. and gratuity amount.  (refer Annexure B ).
-  Rationalisation of TDS/TCS provisions: In the current Budget 2025-26, it has been  proposed  to  increase  the  limit  for  tax  deduction  at  source  in  respect  of certain income such as interest income for senior citizens and rental income etc (refer Annexure C ). Further, it was also announced in the current Budget 202526    to  remove  tax  collected  at  Source  (TCS)  on  remittances  for  education purposes where such remittance is out of a loan taken from a specified financial institution.

-  Tax  exemption  for  Income  from  Long-Term  Capital  Gains  (LTCG): For investments in equities and mutual funds, long-term capital gains (gains made on assets held for more than a year) up to Rs 1.25 lakh per financial year are exempted from income tax.
-  Option  of  tax  regimes: Though  the  New  income  tax  regime  was  made  the default tax regime in the Budget 2023-24, taxpayers have the option to avail the benefit of the old tax regime. Under the old regime, Individual/ HUF taxpayers are eligible to claim these exemptions/deductions and have a wide range of tax preferences available to them.

Periodically,  the  Government  has  reduced  tax  burden  of  middle-class  taxpayers through changes in income slab and tax rates. The tax rates under the new tax regime are comparatively lower than the tax rates in old regime for the respective income slabs. The new structure proposed in the current Budget will substantially reduce the taxes of the middle  class  and  leave  more  money  in  their  hands,  boosting  household  consumption, savings  and  investment.  As  a  result  of  proposals  introduced  in  the  Budget  2025-26, revenue of about ₹ 1 lakh crore in direct taxes will be forgone.

## (c) the details of estimated impact of these measures on middle-class taxpayers?

## Reply:

- (1) The tax benefits provided under the new tax regime by the Government to individuals are intended to have a multiplier effect in the economy. Tax benefits are specifically designed to  ease  the  financial  burden  on  individuals  and  households  falling  within  the  middleincome  bracket  that  help  reduce  their  tax  liability  and  encourage  consumption,  savings investments  and  long-term  financial  planning.  By  leveraging  the  various  provisions available under the Income Tax Act, middle-class taxpayers can effectively reduce their tax liability and increase their disposable income, which in turn would increase the purchasing power of the middle class.
- (2) The estimated revenue foregone for the measures introduced in the Budget 2023-24 for the middle-class taxpayers is Rs 35,000 Crore annually and for the measures introduced in the Budget 2024-25 (July,2024) is Rs 7,000 Crore annually. For the measures proposed in the current Budget 2025-26, the estimated revenue of about Rs 1 lakh crore in direct taxes will be forgone.
- (3) The  tax  exemptions  and  benefits  availed  by  the  individuals/HUFs  have  progressively increased  over  the  years  as  evident  from  the  reply  in  part  (a)  above.  The  total  revenue impact of major tax incentives for Individual/HUF taxpayers for last five years amounts to Rs  8,69,907.40  Crores.  Further,  the  tax  benefits  which  were  earlier  granted  through  the exemptions  and  deductions  (under  Chapter VIA)  of  the  Income-tax Act,1961  in  the  old regime are now in-built into the slab and rate structure as well as some  exemptions and deductions  such  as  employers'  contribution  under  NPS,  Rebate  etc.  available  under  the new  tax  regime.  Therefore,  tax  benefits  by  way  of  slabs  and  rates  under  the  New  tax regime is more than what is available through exemptions and deductions (under Chapter VIA) in the Old regime. This is clearly shown by the number of taxpayers opting for the new tax regime i.e. about 75% of taxpayers paid lesser tax than what they would have paid had  they  availed  the  old  tax  regime  with  deductions  and  exemptions.  It  shows  that  the greater benefits have been given to middle-class taxpayers.

*****

- (i) A  comparison  of  the  tax  rates  and  slabs  under  the  old  regime  and  the  new regime introduced in the Budget 2020-21 is as under:-
- (ii) The tax slabs and rates in the new regime were further revised in the Budget 2023-24 for Assessment Year 2024-25 as under:-
- (iii) The tax rates under the new tax regime were further revised in the Budget 2024-25 (July,2024) w.e.f. Assessment Year 2025-26 as under:

| Taxable Income Slab (Rs)    | Existing Tax Rates under old regime   | New Tax Rates under new tax regime   |
|-----------------------------|---------------------------------------|--------------------------------------|
| Upto 2,50,000               | Nil                                   | Nil                                  |
| From 2,50,001 to 5,00,000   | 5%                                    | 5%                                   |
| From 5,00,001 to 7,50,000   | 20%                                   | 10%                                  |
| From 7,50,001 to 10,00,000  | 20%                                   | 15%                                  |
| From 10,00,001 to 12,50,000 | 30%                                   | 20%                                  |
| From 12,50,001 to 15,00,000 | 30%                                   | 25%                                  |
| Above 15,00,000             | 30%                                   | 30%                                  |

| Taxable Income (Rs)                 | Rates   |
|-------------------------------------|---------|
| Upto Rs. 3,00,000                   | Nil     |
| From Rs. 3,00,001 to Rs. 6,00,000   | 5%      |
| From Rs. 6,00,001 to Rs. 9,00,000   | 10%     |
| From Rs. 9,00,001 to Rs. 12,00,000  | 15%     |
| From Rs. 12,00,001 to Rs. 15,00,000 | 20%     |
| Above Rs. 15,00,000                 | 30%     |

| Taxable Income (Rs.)                | Rates   |
|-------------------------------------|---------|
| Upto Rs. 3,00,000                   | Nil     |
| From Rs. 3,00,001 to Rs. 7,00,000   | 5%      |
| From Rs. 7,00,001 to Rs. 10,00,000  | 10%     |
| From Rs. 10,00,001 to Rs. 12,00,000 | 15%     |
| From Rs. 12,00,001 to Rs. 15,00,000 | 20%     |
| Above Rs. 15,00,000                 | 30 %    |

- (iv) The tax rates  under  the  new  tax  regime  proposed  in  the  current  Budget  2025-26 w.e.f. from Assessment Year 2026-27 is proposed to be as under:
-  A few examples for calculation of tax benefit to the middle-class tax payers are given in the table below:

| Taxable Income (Rs.)                | Rates   |
|-------------------------------------|---------|
| Upto Rs. 4,00,000                   | Nil     |
| From Rs. 4,00,001 to Rs. 8,00,000   | 5%      |
| From Rs. 8,00,001 to Rs. 12,00,000  | 10%     |
| From Rs. 12,00,001 to Rs. 16,00,000 | 15%     |
| From Rs. 16,00,001 to Rs. 20,00,000 | 20%     |
| From Rs. 20,00,001 to Rs. 24,00,000 | 25%     |
| Above Rs. 24,00,000                 | 30%     |

| Income   | Tax on Slabs and rates   | Tax on Slabs and rates   | Benefit of   | Rebate benefit       | Total Benefit   | Tax after rebate Benefit   |
|----------|--------------------------|--------------------------|--------------|----------------------|-----------------|----------------------------|
|          | Present                  | Proposed                 | Rate /Slab   | Full upto Rs 12 lacs |                 |                            |
| 8 lac    | 30,000                   | 20,000                   | 10,000       | 20,000               | 30,000          | 0                          |
| 9 lac    | 40,000                   | 30,000                   | 10,000       | 30,000               | 40,000          | 0                          |
| 10 lac   | 50,000                   | 40,000                   | 10,000       | 40,000               | 50,000          | 0                          |
| 11 lac   | 65,000                   | 50,000                   | 15,000       | 50,000               | 65,000          | 0                          |
| 12 lac   | 80,000                   | 60,000                   | 20,000       | 60,000               | 80,000          | 0                          |
| 16 lac   | 1,70,000                 | 1,20,000                 | 50,000       | 0                    | 50,000          | 1,20,000                   |
| 20 lac   | 2,90,000                 | 2,00,000                 | 90,000       | 0                    | 90,000          | 2,00,000                   |
| 24 lac   | 4,10,000                 | 3,00,000                 | 1,10,000     | 0                    | 1,10,000        | 3,00,000                   |
| 50 lac   | 11,90,000                | 10,80,000                | 1,10,000     | 0                    | 1,10,000        | 10,80,000                  |

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## Exemptions/tax benefits available under New tax regime:

- (i) Increase  in  exemption  of  Leave  encashment  limit  u/s  10(10AA): In  the  Budget 2023-24, the limit of encashment of leave up to 10 months of average salary, at the time  of  retirement  in  case  of  an  employee  (other  than  an  employee  of  the  Central Government or State Government), was enhanced to Rs.25 lakh from Rs.3 lakh.
- (ii) Deduction  under  section  80CCD(2) for employer's (other than the Central Government and State Government) contribution to employee NPS accounts, has been increased from 10% to 14% in the Budget 2024-25 (July,2024).
- (iii)   Tax exemptions are available for the following allowances received by the salaried persons:
-  any  travel  allowance  granted  to  meet  the  cost  of  travel  on  tour  or  on transfer;
-  any  daily  allowance  to  meet  the  ordinary  daily  charges  incurred  by  an employee  on  account  of  absence  from  his  normal  place  of  duty,  whether granted on tour or for the period of journey in connection with transfer,
-  any  conveyance  allowance  granted  to  meet  the  expenditure  incurred  on conveyance in performance of duties of an office or employment;
-  any such special allowance or benefit, specifically granted to meet expenses wholly incurred in the performance of the duties of an office or employment
-  any  such  allowance  granted  to  the  assessee  either  to  meet  his  personal expenses at the place where the duties of his office or employment of profit are ordinarily performed by him or at the place where he ordinarily resides, or to compensate him for the increased cost of living, as may be prescribed and to the extent as may be prescribed:
- (iv) Tax  exemption  in  respect  of  the  amount  received  on  voluntary  retirement  u/s 10(10C) and gratuity u/s 10(10) subject to the limit prescribed.
- (v) Reduction in surcharge and maximum tax rate: Highest surcharge under the new regime has been reduced to 25 percent from 37 percent in the Budget 2023-24. This has reduced the maximum rate from 42.74 per cent to 39 per cent.
- (vi) Annual  value  of  the  self-occupied  property  simplified  u/s  23: Presently  taxpayers  can  claim  the  annual  value  of  self-occupied  properties  as  'Nil'  only  on  the fulfilment of certain conditions. Considering the difficulties faced by taxpayers, in the Budget  2025,  it  has  been  proposed  to  allow  the  benefit  of  two  such  self-occupied properties, if the owner occupies it for his own residence or cannot actually occupy it due to any reason.
- (vii) Increase in limits of certain perquisites: In the Budget 2025, it has been proposed to  increase  the  limits  on  the  income  of  the  employees  for  the  purpose  of  calculating perquisites u/s 17 of the Act which will benefit salaried class taxpayers.

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## Annexure C

Rationalisation of TDS/TCS provision : The increased threshold for TDS rates under various provisions which will have a positive impact are enumerated as follows:-

|   S. No. | Section of the Act                                                                    | Present TDS/TCS threshold (in Rs.)                                                                                                                   | Proposed TDS/TCS threshold (in Rs.)                                                                                                                        |
|----------|---------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        1 | 194A - Interest other than Interest on securities                                     | (i) 50,000/- for senior citizen; (ii) 40,000/- in case of others when payer is bank, cooperative society and post office (iii)5,000/- in other cases | (i) 1,00,000/- for senior citizen; (ii) 50,000/- in case of others when payer is bank, co- operative society and post office (iii) 10,000/- in other cases |
|        2 | 194-I Rent                                                                            | 2,40,000/- during the financial year                                                                                                                 | 50,000/- per month or part of a month                                                                                                                      |
|        3 | 193 - Interest on securities                                                          | Nil                                                                                                                                                  | 10,000/-                                                                                                                                                   |
|        4 | 194- Dividend, for an individual shareholder                                          | 5,000/-                                                                                                                                              | 10,000/-                                                                                                                                                   |
|        5 | 194K- Income in respect of units of a mutual fund or specified company or undertaking | 5,000/-                                                                                                                                              | 10,000/-                                                                                                                                                   |
|        6 | 194D - Insurance commission                                                           | 15,000/-                                                                                                                                             | 20,000/-                                                                                                                                                   |
|        7 | 194G - Income by way of commission, prize etc. on lottery tickets                     | 15,000/-                                                                                                                                             | 20,000/-                                                                                                                                                   |
|        8 | 194H - Commission or brokerage                                                        | 15,000/-                                                                                                                                             | 20,000/-                                                                                                                                                   |
|        9 | 194J - Fee for professional or technical services                                     | 30,000/-                                                                                                                                             | 50,000/-                                                                                                                                                   |
|       10 | 194LA - Income by way of enhanced compensation                                        | 2,50,000/-                                                                                                                                           | 5,00,000/-                                                                                                                                                 |
|       11 | 206C(1G)- Remittance under LRS and overseas tour program package                      | 7,00,000/-                                                                                                                                           | 10,00,000/-                                                                                                                                                |

It has been proposed to remove TCS on remittances for education purposes, where such remittance is out of a loan taken from a specified financial institution.

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