A shift to the new, voluntary income tax regime will not lead to lower savings in the country, Revenue Secretary Sanjay Malhotra has said.
"The savings through tax exemptions is actually a very small portion of the total savings of our country, which is about Rs 25 lakh crore for households, of which savings through tax (saving) instruments are only Rs 4 lakh crore," Malhotra said on February 3 at a post-Budget industry interaction.
Given the absence of exemptions and deductions from the new system introduced three years ago, there has been a reluctance to shift to it. However, the 2023 Union Budget presented on February 1 has tried to make it more attractive in several ways, including lower tax rates and greater simplicity.
The government hopes that the incentives provided in Budget 2023 will see a majority of individuals shift to the new tax system, which has also been made the default one.
This has led to some concerns over whether the forced savings done for tax purposes under the old tax system would get affected, hurting the overall savings level in the economy.
However, Malhotra argued that this will not be the case as "people are now investing otherwise" also. Further, he said the Budget itself announced a new savings scheme and expanded the scope of a couple of others.
"Moreover, the market will certainly recalibrate and find the right levels and make it more attractive for people to save so that the country has enough money to invest," the revenue secretary added.
As per data available from the statistics ministry, gross savings in nominal terms amounted to Rs 55.92 lakh crore in 2020-21, down from Rs 59.96 lakh crore the previous year.
The share of households in gross savings is a massive 78.5 percent, with the rate of gross saving to gross national disposable income for 2020-21 estimated at 27.8 percent, down from 29.4 percent for 2019-20, the data showed.
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