The Tax Gambit

Much ink has been spilled by now on the Budget’s hike in the tax-free ceiling under the new income tax system introduced in 2020, to ₹7 lakh from ₹5 lakh, with lower tax rates for those who give up existing tax exemptions.

5 Jun 2023

Context: 

Much ink has been spilled by now on the Budget’s hike in the tax-free ceiling under the new income tax system introduced in 2020, to ₹7 lakh from ₹5 lakh, with lower tax rates for those who give up existing tax exemptions.

Experts Concerns on take away of the old tax regime:

  • Exemptions “give some social security to the middle class” altogether will be affected.
  • May affect the savings rate and hit investments.
  • Lower income earners do not save enough to avail the tax-exemptions and end up paying higher rates.
  • India’s literacy and financial literacy levels mean many taxpayers cannot deem the right mix of consumption and savings.
  • Inflation beating investments. 

Why is the old tax regime required?

The old exemption-based regime helps guide families towards some level of prudent asset allocation to cope with life’s uncertainties, with a leg-up for building a critical asset over their working lives — a roof over their head.

Conclusion:

The nudge away from the old tax regime must be accompanied by greater financial literacy efforts from the government and regulators and a crackdown on unethical selling practices that could lead to people ending up in penury.

News Source: The Hindu

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UDAAN PRELIMS WALLAH
Comprehensive coverage with a concise format
Integration of PYQ within the booklet
Designed as per recent trends of Prelims questions
हिंदी में भी उपलब्ध

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