The 12 months 2020 was difficult for the salaried class. From wage cuts to dealing with extra bills on account of distant working and lack of ability to assert sure exemptions like gasoline reimbursements, and many others, the salaried class braved all of it. Given this, the taxpayers predict aid within the type of improve in exemptions/deductions from the federal government within the upcoming Price range.
Final 12 months’s Price range launched the brand new concessional tax regime that provides a person the choice to decide on decrease tax charges in lieu of forgoing sure tax exemptions and deductions. A few of these advantages embrace commonplace deduction, exemption in the direction of home hire allowance, depart journey allowance, home property loss, and deduction in the direction of provident fund contributions and life insurance coverage premiums.
The brand new regime, efficient from monetary 12 months 2020-21, prescribes tax charges starting from 5% to 30% with the very best tax price relevant for revenue above Rs 15 lakh. This feature is useful in these instances the place a person has fewer exemptions and deductions to be claimed. People with increased revenue ranges and tax-saving investments qualifying for deductions or exemptions might not discover the brand new regime engaging.
Analysis of sure components will likely be necessary for particular person taxpayers earlier than deciding whether or not to proceed with the outdated tax regime or go for the brand new tax regime.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 retaining in thoughts her/his investments.
Whereas the brand new tax regime is useful for a choose section of particular person taxpayers, there’s a want to deal with the expectations of the opposite set of particular person taxpayers preferring to take a position 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 on the lookout for 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 extra advantages accessible for first-time homebuyers, extending the advantage of the newly launched LTC money voucher to the following monetary 12 months, extra funding alternatives for availing tax advantages via funding in infrastructure bonds and many others. Given the various profile of taxpayers, there exists a case for coexistence of each the regimes going ahead.
– Amarpal S Chadha
(The writer is Tax Companion, EY India. Shanmuga Prasad, Senior Tax Skilled with EY, has additionally contributed to this text. Views are private.)