The yr 2020 was difficult for the salaried class. From wage cuts to dealing with further bills on account of distant working and incapability to assert sure exemptions like gas reimbursements, and so on, the salaried class braved all of it. Given this, the taxpayers expect aid in the type of enhance in exemptions/deductions from the authorities in the upcoming Budget.
Last yr’s Budget launched the new concessional tax regime that provides a person the possibility to decide on decrease tax charges in lieu of forgoing sure tax exemptions and deductions. Some of these advantages embody normal deduction, exemption in direction of home hire allowance, go away journey allowance, home property loss, and deduction in direction of provident fund contributions and life insurance coverage premiums.
The new regime, efficient from monetary yr 2020-21, prescribes tax charges starting from 5% to 30% with the highest tax charge relevant for revenue above Rs 15 lakh. This possibility is useful in these instances the place a person has fewer exemptions and deductions to be claimed. Individuals with larger revenue ranges and tax-saving investments qualifying for deductions or exemptions could not discover the new regime enticing.
Evaluation of sure elements can be vital for particular person taxpayers earlier than deciding whether or not to proceed with the previous tax regime or choose for the new tax regime.
Individuals with restricted deductions or exemptions would have the benefit of extra tax financial savings by opting for the new tax regime. The degree of tax financial savings would depend upon the revenue ranges and each particular person must undertake a reality-particular analysis maintaining in thoughts her/his investments.
While the new tax regime is useful for a choose phase of particular person taxpayers, there’s a want to deal with the expectations of the different set of particular person taxpayers preferring to speculate for securing their future and want to avail the deductions linked to investments.
The pandemic has resulted in a monetary burden on many and, therefore, the taxpayers are trying for relaxations like extension of profit to non-senior residents (underneath the present regulation, senior residents are allowed deduction of as much as Rs 50,000) for medical expenditure underneath Section 80D, rising the cap of curiosity on housing mortgage, extension of further advantages accessible for first-time homebuyers, extending the profit of the newly launched LTC money voucher to the subsequent monetary yr, further funding alternatives for availing tax advantages by way of funding in infrastructure bonds and so on. Given the diverse profile of taxpayers, there exists a case for coexistence of each the regimes going ahead.
– Amarpal S Chadha
(The writer is Tax Partner, EY India. Shanmuga Prasad, Senior Tax Professional with EY, has additionally contributed to this text. Views are private.)