The Union budget this time has come with a lot of offerings and attractions for various sections, especially the middleclass tax payers. Income tax cuts are a very popular measure and the Vivad se Vishwas tak approach of the Government has been taken further.
Having said that, among the many popular announcements is a suspense hanging around the new Income Tax Bill to be presented in the Lok Sabha next week.
SALARIED AND SELF EMPLOYED
Anyone earning income upto 12 lacs has to pay 0 taxes on income, if he/she chooses the New Tax Regime.
For salaried people another 75000 is exempt from tax.
With the change in tax slabs, even someone earning 35 lacs per annum will save upto 1.4 lacs in tax.
Withdrawal from old NSS account and NPS Vatsalya account are now tax exempt.
SENIOR CITIZENS
Interest payments to senior citizens does not attract TDS if the payment is upto 1 lac (as compared to 50,000/- previously).
HOME-OWNERS
No TDS need be deducted on rent payment upto 6 lacs (as compared to 2.4 lacs previously)
Individuals can claim two self-occupied properties as NIL taxable income.
DELAY IN FILING INCOME TAX RETURN
Updated Income Tax Return can now be filed for upto 48 months after the last date for filing regular ITR. This means even if you omitted to file an ITR in the first place you can file it now.
FOR EVERYONE
New Income Tax bill to be proposed next week.
Life-saving and cancer medication to become cheaper.
KYC and CKYC reforms to make it completely digital and seamless, announced.
STUDENTS AND ACADEMICS
Initiative to set up a digital forum for Indian language books for schools.
Centre of Excellence for AI for education to be set up.
Expansion of IIT Patna has been announced.
Centre for excellence in skilling for global workforce announced.
DEEP DIVE IF...
If you are connected to any of the following sectors of professions, please deep dive into the Budget to find more proposals for you :
Enterprises classified as Micro, Small and Medium Enterprises ( MSME )
Exporters, Export oriented unit
Hospitality Industry
Tourism Industry
Automobile industry / Automobile sales
Scientists
The budget has also announced new fellowships being announced for scientists, new fund for research and simplification of many processes to increase ease of doing business in India. These are measures with far reaching positive consequences and laudable.
The Finance Minister has claimed that the tax relief will boost demand and uplift the economy. They will also bring relief to the middle class suffering the consequences of inflation, says the minister.
Though many measures are worth applauding I have serious misgivings about one standout feature of the New Tax Regime. Many people invest in retirement related and long term investments only because it yields some tax benefit. Most life insurance is bought to reduce tax payable. Investing for retirement or buying insurance just to save tax is not the right approach to prudent money management but is nevertheless bringing about some wealth creation for the future and retirement planning into the lives of people.
The new tax regime and the increasing tax breaks there are directly discouraging this creation of retirement assets and insurance support, by taking away the tax benefit on these activities.
With developed economies struggling with large sections of population having below par or no savings and living on state support in old age, developing economies like ours, where state support is not available at large, should prioritise savings and investment. Especially when it is a part of our culture and ethos. Sacrificing savings for demand is just giving into consumerism.
Are we learning the right lessons from economies that have walked this path before, I wonder.
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