The upcoming budget is expected with the hope that the taxes would be exempted particularly for the salaried people. Budget 2022-23 is coming at a difficult time as the Omicron has disrupted the calculations during the time when the economy is going to recover. Affecting from the covid variant the countries are forced to shut their borders intensifying supply-side pressures and aggravating inflation.
People’s income has been affected by this as they lost their jobs, pay cuts were executed and various businesses were forced to close their operations. The demand of the customers was back to normal with difficulty and the new variant seems to affect the consumers along with the demand.
Under the compliance of the present Modi government, the direct tax reform is under process through more and more obedience and simple interface along with the Income-tax faceless assessments, etc. however the salaried, middle, and lower middle class owned with the raw end of the tax deal on which the work has been done by the government with several years.
Reasons to Revise Income Tax Rates
The government has started the upgraded income tax scheme in its former year budget and mentioned that assessees have the choice of choosing between the old regime or the new regime. The new regime also provides a lower tax rate for the people who refused the advantage of having the tax deductions on the specific savings and the expenses.
Tax experts mentioned that in most cases people do not want to go from the former framework as everyone owns some savings. “Nearly all assesses have their PF getting deducted. Multiple income tax regimes create a mess. When we talk about simplicity, there are glitches in the system, inordinate delays in filing notifications and so on. When we (as a CA firm) face trouble, how can an individual navigate the online filing system without help?”
Income Tax Exemptions and Deductions
The latest tax regime will be affected from 1st April 2020 (the financial year 2020-21) under section 115BAC of Income Tax Act, 1961. The same would not permit 70 exemptions and the deductions like house rent and the leave travel allowance, education allowance, section 80c, and 80d advantage and home loan interest deduct beneath Section 24.
Tax expert mentioned that “Two schemes don’t work—they add to the complexity. We don’t need two regimes. Confusion and uncertainty should not be there in taxation.” The same holds the strong case for the other rationalization of the income tax rates for the specific person.
Arvind Panagariya, economist along with the professor of economics at Columbia University specified that the improvement in the direct tax is due from a longer period. “In the Indian system, an income between Rs 2.5-5 lakh gets taxed at 5 per cent. If I earn Rs 4,99,999, I get taxed at 5 per cent, if I earn a rupee more than I get taxed at 10 per cent. It disincentives me from any work to move beyond the income bracket. Unless I jump over a lakh rupees. If my income is Rs 6,00,000 I would do everything to keep it below Rs 5,00,000—this system creates a huge incentive to lie. In India, marginal and average tax rates are the same. The horizontal inequity in taxation has to end. If income is coming from another source, it gets taxed differently. This has to end.”
High Income Tax Rates Across World
Towards individual tax rates the income tax rates of the country come under the highest in the world. For the persons whose income is more than Rs 15 lakh, the tax rate upon the salaries would be more than 30% but the corporate tax rate gets lowered to 15% for the new units. Despite the financial consideration that would make the rates of the tax lower in the budget, the salaried class who furnish the taxes and consumes the economy has been left behind for a longer period.
Also, the exemption gets reduced and things like conveyance allowance and house rent allowance are not so good for the current time. The allowances are being hidden which are not being shown in the market along with the education cost load for the middle-class people. The budget would take a combined look and make the privilege more shown in today’s times.
