Union Finance Minister Nirmala Sitharaman on Saturday announced a new income tax system while presenting her second general budget. He said that the income tax payers who want to take advantage of this new system will have to give up 70 out of 100 exemptions.
In the new income tax system, if someone earns 5-7.5 lakh rupees annually, then he will have to pay only 10 percent tax instead of 20 percent. A person earning Rs 7.5-10 lakh per annum will have to pay only 15 per cent tax instead of 20 per cent.
Those whose annual income is Rs 10-12.5 lakh, they will pay 20 percent tax instead of 30 and those earning more than 15 lakh will have to pay 30 percent tax at the current rate.
There is no change in the new tax system for those earning five lakh rupees annually. Their income will be tax free.
When the Finance Minister was announcing this income tax system in his budget speech, he clarified that this is being done so that common people can understand it and they do not have to take help of professional people while filing tax returns.
The term 'tax' was used 132 times in a two and a half hour long budget speech.
The new tax system will be optional and taxpayers will have the choice whether they want to go with the old system or with the new one. In the old system, you will continue to get discounts and deductions as before.
After the multiplication of the new tax system and the old tax system, many tax experts say that the old tax system is fine for a long time.
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Experts believe that the new tax system is more complicated and it will not leave necessary money in the hands of the people.
Krishna Kumar Karve, managing director of MK Global Financial Services, says that the new tax system will not inspire young Indians to save money for the future.
He says, "In a country with a young population like India, where there is poor social security, it is necessary to encourage the youth to save for the future and be their own home."
How much tax will be made in the new systemThe
Arnav Pandya, founder and Money Expert of MoneyEdchool, believes that 'most people who take advantage of these deductions will feel that they will have to pay more tax in the new tax system. They have little hope of choosing it. "
As an example, we understand that if your annual income is eight lakh rupees, then under your old tax system, Rs 39000 tax is made and if you go with the new tax system, then you will have to pay Rs 46000 tax. That is, in the new system, 7000 rupees more tax will have to be paid.
If your annual income is Rs 15 lakh, then under the old tax system, you will have to pay tax of Rs 1,56,000 and under the new system, Rs 1,95,000. That is, in the new system, you will pay 39,000 rupees more tax.
What tax exemptions will you have to waive in the new tax system?
-Section 80C (PF, National Pension System, Investment on life insurance premium is exempt)
-Section 80D (Medical insurance premium, change in tax rates on housing rent allowance and giving interest on housing loan)
Tax exemption cannot be taken on the interest given in education loan under section 80E.
– Leave travel allowance to the employee twice in four years.
Tax exemption on donations given to Charitabus Institutions under Section 80G.
Tax rebate on disability and charitable donations.
– Standard exemption of Rs 50000 currently paid to salaried taxpayers.
Entertainment allowance and employment / professional tax exemption under section 16.
– Rebate for family pension up to 15000 rupees.
However, it is not yet clear whether most will get the benefit of substantial tax savings in the new personal tax system. Questions are also arising as to how it inspires financial savings and future security. As in the old system, investments in PF, medical insurance and pension schemes were exempted.
In addition, sub-section (2) of section 80 CCD (amount to be paid by the employer in the pension scheme to the employee's account) and section 80 JJAA (for new employment) can still be claimed.
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Archit Gupta, founder and CEO of Clear Tax, says, "The new system is moving towards a roadmap to remove all exemptions and deductions. Taxpayers who want to take advantage of more and more tax take this new system backwards Is going to go and the taxpayers will adopt the old tradition of tax filing. "
He says, "There may be less paper work in the new tax system and it is acceptable to many taxpayers, but they will take advantage of the same which gives them more tax exemption. Another downside is that the government will get new deductions. Should have thought about it because the old ones have become meaningless. "
With 80C being optional, people can stop investing in PPF / EPF and this is not good for the economy in the long run.
The government also has a clear indication that it is not in favor of giving tax free interest on PPF and wants to bring all taxpayers to the National Pension Scheme (NPS).
Even on Saturday, on the budget day, the stock market opened and the Finance Minister's speech got busted. BSE fell to 2.43%, which means that the market did not like the budget.
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Insurance of 5 lakhs on bank deposits
Another important announcement that was made in the Finance Minister's budget speech was to increase the amount of insurance on bank deposits. Deposit Insurance and Credit Guarantee Corporation has promised to give depositors Rs 5 lakh instead of one lakh in the event of bank collapse.
When the PMC bank crisis surfaced, the common people were worried about their money kept in the bank. After this, the experts also raised their voice and said that the amount of one lakh rupees is very less.
This means that if someone's 95000 rupees are in an Indian bank, then that bank can get full amount in case of drowning.
During the budget speech, the Finance Minister while explaining about this also reiterated that the common man need not worry and his money kept in banks is safe.
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