The yr 2020 was difficult for the salaried class. From wage cuts to dealing with further bills because of distant working and lack of ability to say sure exemptions like gas reimbursements, and so forth, the salaried class braved all of it. Given this, the taxpayers predict aid within the type of enhance in exemptions/deductions from the federal government within the upcoming Finances.
Final yr’s Finances launched the brand new concessional tax regime that gives a person the choice to decide on decrease tax charges in lieu of forgoing sure tax exemptions and deductions. A few of these advantages embody commonplace deduction, exemption in direction of house rent allowance, depart journey allowance, home property loss, and deduction in direction of provident fund contributions and life insurance coverage premiums.
The brand new regime, efficient from monetary yr 2020-21, prescribes tax charges starting from 5% to 30% with the very best tax price relevant for revenue above Rs 15 lakh. This selection is helpful in these circumstances the place a person has fewer exemptions and deductions to be claimed. People with larger revenue ranges and tax-saving investments qualifying for deductions or exemptions could not discover the brand new regime enticing.
Analysis of sure components shall be necessary for particular person taxpayers earlier than deciding whether or not to proceed with the previous tax regime or go for the brand new tax regime.
People with restricted deductions or exemptions would have the benefit of extra tax financial savings by choosing the brand new tax regime. The extent of tax financial savings would rely upon the revenue ranges and each particular person must undertake a fact-specific analysis holding in thoughts her/his investments.
Whereas the brand new tax regime is helpful for a choose phase of particular person taxpayers, there’s a want to handle the expectations of the opposite set of particular person taxpayers preferring to take a position for securing their future and wish to avail the deductions linked to investments.
The pandemic has resulted in a monetary burden on many and, therefore, the taxpayers are in search of relaxations like extension of profit to non-senior residents (beneath the present legislation, senior residents are allowed deduction of as much as Rs 50,000) for medical expenditure beneath Part 80D, growing the cap of curiosity on housing mortgage, extension of further advantages obtainable for first-time homebuyers, extending the advantage of the newly launched LTC money voucher to the following monetary yr, further funding alternatives for availing tax advantages by way of funding in infrastructure bonds and so forth. Given the numerous profile of taxpayers, there exists a case for coexistence of each the regimes going ahead.
– Amarpal S Chadha
(The creator is Tax Accomplice, EY India. Shanmuga Prasad, Senior Tax Skilled with EY, has additionally contributed to this text. Views are private.)