Government of India has a stated policy to streamline the tax exemption framework by removing various exemptions, deductions, and incentives, while simultaneously reducing applicable tax rates for corporations and individuals. Key measures include the Taxation Laws (Amendment) Act, 2019, which introduced a 22% concessional tax rate for domestic companies under Section 115BAA, subject to conditions like non-eligibility for specified deductions. Similarly, the Finance Act, 2020 introduced a new tax regime for individuals and Hindu Undivided Families (HUFs) under Section 115BAC, offering lower slab rates in exchange for forfeiting specified exemptions. This regime was further enhanced by the Finance Act, 2023. Additionally, the Finance Act, 2020 abolished the Dividend Distribution Tax (DDT), shifting the tax liability to shareholders and benefiting individuals taxed at lower rates. To further support middle-class taxpayers, the Finance Bill, 2025 proposes revising tax rate structures under the new tax regime, aiming to reduce their tax liabilities and increase disposable income. These steps demonstrate the Government’s efforts to balance corporate tax benefits with enhanced financial relief for individual taxpayers, particularly in the middle-income segment.
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF REVENUE
LOK SABHA
UNSTARRED QUESTION NO. 1720
TO BE ANSWERED ON MONDAY, MARCH 10, 2025/PHALGUNA 19, 1946 (SAKA)
CURRENT TAX EXEMPTION FRAMEWORK
1720. SHRI DUSHYANT SINGH:
Will the Minister of FINANCE be pleased to state:
(a) whether the Government has conducted any assessments to identify gaps in the current tax exemption framework, if so, the steps being taken to address the same; and
(b) the manner in which the Government plans to balance the provision of tax benefits for corporations with the need to enhance disposable income for individual taxpayers particularly the middle class?
ANSWER
THE MINISTER OF STATE IN THE MINISTRY OF FINANCE
(SHRI PANKAJ CHAUDHARY)
(a) & (b) It is the stated policy of the Government to remove exemptions, deductions and incentives while at the same time reduce the rates of income-tax applicable to corporates and individuals.
In line with the stated policy above, –
- The Taxation Laws (Amendment) Act, 2019, inter-alia, inserted section 115BAA in the Act to provide an option for existing domestic companies to pay income-tax at concessional rate of 22% subject to certain conditions including the condition that they do not avail any specified deductions or incentives.
- Finance Act, 2020, inter-alia, introduced the new tax regime under section 115BAC of the Act, wherein individual and HUF had an option to pay income-tax at the lower slab rates subject to certain conditions including that they do not avail specified tax exemptions or deductions. The said regime was improved to reduce the tax liability and extended to certain other persons vide Finance Act, 2023.
- Finance Act, 2020, inter-alia, abolished Dividend Distribution tax paid by corporates at the rate of 15% thereby relieving them of this tax liability. Now, dividend is taxed in the hands of shareholders at the applicable slab rates leaving more income in the hands of individual taxpayers whose income is chargeable to tax at lower slab rates.
Further, to enhance disposable income for individual taxpayers particularly the middle class, Finance Bill, 2025 has proposed to revise the tax rate structure in the new tax regime which will substantially reduce the tax liability of the middle class and leave more money in their hands.
