Our current Finance Minister Ms Nirmala Sitharaman introduced choice in tax regimes for us.
She brought in a new variant called the New Tax Regime. Simply put if you choose this regime, you get to pay lower taxes without having to make any tax saving investments. It is less hassle, less paperwork, so to speak.
The old tax regime allows taxpayers to claim tax deduction for saving money in locked-in investments like Public Provident Funds (PPF) or Tax Saving Mutual Funds (ELSS). It also allows exemptions for money spent on buying Life and Health Insurance or taking a loan to buy a house.
A big majority of people bought life & health insurance specifically for tax saving. Ask anyone in insurance sales they will tell you it is the single highest reason these products sell, especially in the last 3 months of a financial year. Wrong reason to buy insurance, but the result was good. People who would have spent away money shopping or otherwise, used it to ensure a little bit of financial security for their families. They continued to pay premiums and kept the insurance active as every year your premium paid got you “Tax Benefit”.
People invested money in avenues with a lock-in sometimes 15 years like a Public Provident Fund or 3 to 5 years like a Tax Saving Bank Deposit or Tax Saving Mutual Funds. Even age related lock-in schemes like the National Pension Scheme or the NPS. This keeps money from being spent on immediate wants, allows money to compound and grow. Additionally creates a Retirement Corpus defacto.
In a nation that is seriously under-insured, increasingly seeing people unable to retire due to financial reasons, increasing indebtedness of households and growing consumerism, is the government awarding prudence or punishing it.
Even a default saving like EPF, which our parents’ entire generation used to build their retirement corpuses is being taxed above a limit!
I agree there is much to be said about boosting the economy by boosting consumer spending. But why not learn from economies that have been savers, have had internal funds from savings to invest in their businesses and hence growth. Why not learn from Singapore?
Why are we hell bent on learning from economies that are dissavers? Who spend more than they earn, who have bored holes into their foundations due to this attitude.
Why ignore ancient Indian wisdom which calls balance a virtue and saving a good habit? What is our Government trying to do?
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