For weeks or months before the general budget, it was believed that the personal income tax would be reduced. The corporate income tax rate had already been cut, so the possibility of a reduction in personal income tax was also being raised. No one was aware that instead of reducing tax directly, Finance Minister Nirmala Sitharaman would introduce a parallel system of personal income tax. The same was done in the case of corporate tax earlier in August. That is, corporates have the option to pay tax at a reduced rate if they leave all the tax exemptions. Similarly, now individual taxpayers have the option to pay income tax at a reduced rate if they do not take advantage of tax exemption. Now, depending on how much a person takes advantage of tax exemption, the tax for him may be reduced and may not be less. The same taxpayers are given an option and each taxpayer has to decide whether he should use this option or not.
It seems that people who are earning between 10 to 12 lakh rupees or 15 lakh rupees, they would like to choose a new system with low tax rate because they may have to pay less tax. Apart from this, it will also be easy for them to file tax returns. At the same time, there is no special advantage or disadvantage for those earning Rs 25-30 lakh or more. It is not the same that everyone will be able to take advantage of the kind of tax exemption available. At the moment, calculations are being done in many instances assuming taxpayers can take advantage of all types of tax exemptions. But this is not practical for low-income people. I am particularly concerned about whether people will be indifferent to saving after adopting this alternative tax system? Because people mostly have to give up tax exemption options which are covered under section 80C.
Such as Public Provident Fund, New Pension System and ELSS Fund. The same people invest largely in these options because they get a better option to save tax here. But if one can pay less tax without investing in the investment options under 80-C, very few people will save. Apart from that it is definitely a problem. The idea behind the new tax system is that taxpayers who want to save will have more money to save. But it's up to them if they really want to do it. Is it good or bad? There may be different opinions on this. Nevertheless, I believe that retirement-related investments such as EPF and NPS Tier-1 should be excluded from its purview, even if the options under section 80-C do not get this exemption. This is definitely a mistake and should be corrected before the budget is passed.
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