Finance Minister Nirmala Sitharaman defended the government’s tax reforms on Wednesday, August 7, countering Opposition claims of neglecting middle-class taxpayers in favour of corporations.

Sitharaman, in her address during the discussion on the Finance Bill in Lok Sabha, said richer shareholders pay taxes on dividends at a 39% rate, whereas small and medium income taxpayers pay less than 10%.

She added that the government aims to simplify the tax structure and provide relief across various income groups.

Sitharaman emphasised that the government has reduced the effective tax rate on an annual income of ₹15 lakh to 10% in 2023, with further reductions introduced this year under the new income tax regime. She clarified that the assertion of corporate taxes being lower than individual taxes is unfounded and not based on facts.

In addition to this, the new tax regime rate structure has been revised to provide salaried employees with significant benefits, offering up to ₹17,500 in income tax savings.

“Corporate taxes and individual taxes serve different purposes. While corporates, as legal entities, are taxed on their profits, shareholders now face taxation on dividends at applicable rates since 2020,” she said.

New tax regime adoption

While highlighting the success of the new tax regime, the finance minister revealed that 72.8% of taxpayers, representing 5.25 crore out of a total of 7.22 crore, have opted for the simplified tax slabs. She informed that this is a significant increase from the previous assessment year.

Sitharaman said, “The new regime promotes investment, with mutual fund investments seeing a tremendous increase. Since 2019, 17.88 lakh new folios have been added monthly, and unique investors have grown from one crore in 2014 to four crore today.”

Refuting claims that the new tax regime hampers savings, the finance minister argued that the middle class is not losing out but is instead benefiting from enhanced investment opportunities. She pointed to the significant growth in mutual fund investments and the rise in unique investors, indicating a healthy investment culture fostered by the government’s tax policies.

FM Sitharaman noted the government’s commitment to easing compliance and simplifying the tax regime without drastically increasing taxes, ensuring equitable relief for all taxpayers.

Also read: CNBC-TV18 newsbreak confirmed: Govt moves amendment to provide relief for real estate under LTCG regime