From the forthcoming budget, the salaried people secure much more expectations, and taxes relief is a major concern. In India, from 5% the personal income tax has been started and then goes to 42.74% along with the surcharge and cesses. As compared to other countries like Hong Kong (15%) Sri Lanka (18%), and Singapore (22%), the personal tax rates of India are much higher.
Revision in the Tax Slabs Rates
People have the option to choose the old tax regime that comprises exemptions and standard deductions or the new concessional tax system excluding exemptions or standard deductions. This system has made various issues and confusion.
Tax experts say old taxation is far better than new taxation, and taxpayers worldwide receive these basic tax exemptions. The new tax regime requires revamping.
In the old regime, someone earning Rs 7 lakh did not have to pay taxes, but in the new regime, you have to begin paying taxes once you cross the basic threshold of Rs 2.5 lakh, tax experts said. Towards the latest tax regime for drawing more assesses the same must acknowledge raising the limit for paying the taxes to Rs 7 lakh. As per the experts, the min limit of Rs 10 lakh for 30% tax would be much lower.
Providing Exemptions Would be Effective
A 42.74% is levied which is higher on people and businesses whose yearly income is Rs 5 cr and exceeds and the same would be simpler as compared with overseas countries such as the USA, Canada, and others however the same would be seen that these countries would secure the social security schemes such as medical and pension for every citizen of their country which is not present in India.
In India, tax exemptions and standard deductions run the retirement savings. Furnishing social securities through the method of exemptions and standard deductions is essential. The assesses do not obtain anything during retirement time excluding these social securities which would be made via the exemptions.
Not Consider Much More About Social Security
Tax experts mentioned that Financial safety nets made for citizens include Public Provident Fund contributions and National Savings Certificates, etc. Thus, people will be left without social security if the income tax exemptions are removed as in the new tax regime. Unless life insurance policies are tax-exempt, people won’t purchase them and they won’t have protection if they fall into financial difficulties.
The same would be the pending demand for a long time to supplement the deduction limit (under section 80 C) from R1.5 lakh to R3 lakh, provided the level of inflation.
Recommended: Current Income Tax Rates for Salaried Individuals
Requirement for the Tax Simplification
The taxation procedure would require to be simplified since various provisions in the tax law could make the system complicated. As the process of taxation becomes simpler tax compliance shall get increase. As per the confederation of Indian Industries (CII), confusion has been made by different TDS rates for the assesses which enhances the compliance load and yielded characterization issues. For example, the same would be hard to differentiate between fees for technical services 2% and the fees for professional services 10%.
In addition to collecting all TDS information from deductees in Form 26AS/AIS, the government is more likely to collect the balance taxes from residents. Thus, CII recommended that the government establish a roadmap to reduce disparities in TDS rates by focusing on only two or three types of payments and having a small list of payments exempt from TDS.
Not Required TDS Section 194Q
Tax experts elaborated that the Central Government is responsible for indirect and direct taxes. TDS is a non-justifiable method of collecting information. Earlier this year, the centre introduced TDS Section 194Q, and then in the last budget, 194R was introduced. This has caused a lot of confusion. The GST return already contains all of this information, so TDS is not necessary.
As per ASSOCHAM, a fixed standard deduction stands at the amount of Rs 50,000 would be permitted during calculating the income beneath the head salary no matter what the income made. The same would be recommended to the government that the deduction must be incurred permissible on the pro data/percentage on the grounds of the income for serving the deduction purpose in concern to the making of routine nature expenses.
Tax in Abroad
Hong Kong (15%), Sri Lanka(18%), Bangladesh (25%), and Singapore (22%) has lower personal tax rates compared to India.
The effective tax rate on a person who makes more than Rs 5 cr in India would be 42.74%.
On the exemptions of taxes, and deductions for the concern of retirement savings the Indians are dependent.
In the current times, there are much more issues due to new and old tax regimes.
The experts recommended that there would be requirements for making the taxation process easier.
Experts seek fewer rates towards Tax Deducted at Source (TDS).
Increase the Limit of Tax Section 80C
In cases, taxpayers save tax by taking advantage of Section 80C of the Income Tax Act. NSC, NPS, PPF/EPF, ELSS, SSY, and many other plans are covered here.
Section 80C does not allow deductions beyond Rs 1.5 lakh per year since 2014. According to government estimates, this limit will be raised to at least Rs 2 lakh/year or Rs 2.5 lakh this year. There are even some experts who recommend raising the limit to Rs 3 lakh.
Tax Deduction Under Section 80D
The pandemic has resulted in an increase in health expenses and even an increase in costs. Thus, several experts recommend that Section 80D deductions for health insurance be increased by the government. The maximum amount is currently Rs 25,000.
Income Tax Exemption on Home Loan
Home loan interest and principal payments should be exempt from taxes in the upcoming Budget, according to several experts.
In the case of a self-occupied property, the maximum deduction for home loan interest payments is Rs 2 lakh per fiscal year. Over the past five years, however, the price of property has risen in every region of the country. The country has experienced inflation of 6%-7% over the years. According to section 24(b), the tax saving cap of Rs 2 lakh on housing loans needs to be raised. In any case, the limit should be raised to at least Rs. 3 lakhs, regardless of how much the property costs.
