Welcome to A Most Complicated Individual Taxation System
I started my articleship in 1993 and have been filing individual tax returns for clients since then.
 
The current tax regime proposed by finance minister Nirmala Sitharaman in the Union Budget 2020 is, in my opinion, the most complex since I started filing tax returns. 
 
Here are a few points at a glance:
 
1. We now have three different income tax slabs based on age. Those under the age of 60 years, those above 60 but less than 80, and those above 80 years of age. This is without going into any exemptions and deductions.
 
2. If an individual chooses not to avail of specified exemptions or deductions, s/he then there are two systems:
 
a. A person having business income
 
b. A person not having business income
 
A person without business income can exercise this option every year, but once business income is opted for, the person cannot switch back to old regime.
 
3. If the conditions specified changes then option will have to be checked again. Hence, effectively, one has to check and decide every year whether on can opt in or opt out of the new regime.
 
4. Some of the popular exemptions/ deduction, which will have to relinquished are: 
 
a. Standard deduction for salary
 
b. Deduction under Section 80C i.e. equity linked savings scheme (ELSS), provident fund (PF), insurance premium, school fees, and principal repayment on housing loan.
 
c. Interest on housing loan for self occupied property or vacant property. 
 
d. No loss will be allowed under house property income
 
e. Carry forward of past losses will not be allowed.
 
f. Mediclaim premium and expenses on medical expenses
 
g. Interest on education loan
 
h. Deduction for donations made under section 80G
 
i. Leave travel concession
 
j. House rent allowance (HRA)
 
k. Allowances to members of Parliament (MPs)/members of legislative assembly (MLAs)
 
l. Profession tax deduction for salary
 
m. Family pension deduction under section 57
 
A person needs to inform about opting in or out of this option every year at the time filing tax returns (if no business income) and by the due date for filing return if he has business income. 
 
It would have been truly revolutionary if the 70 exemptions and deductions were removed and same slab rates for everyone. It would mean less for work for CAs but would prefer this any day.
 
(CA Nikhil Vadia has over 25 years of experience in direct and indirect taxation, internal audit, systems review and management consultancy.).
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    COMMENTS

    adityag

    2 months ago

    It's become more convoluted and confusing. It's going to get worse.

    lalit

    2 months ago

    They should tax agricultural income as well if exemption are removed

    lalit

    2 months ago

    They should tax agricultural income as well if exemption are removed

    REPLY

    MOHAN BHASKAR WAGH

    In Reply to lalit 2 months ago

    EACH STATE HAS TO. IMPOSE AGRICULTURE INCOME TAX. CENTER CANNOT

    ksrao

    2 months ago

    I have been filing IT returns from 1962. Every time, the filing has been a nuisance because the rules have been changing. Even if they do not change, we have to ensure that there has been no change. Albert Einstein, the world's greatest physicist, said, "One thing that I do not understand is the income tax" ! If he were to file tax returns in India, he would have had to spend almost all his life every year and he would have had no time to think about space-time or the matter-energy conversion and would have ended as an ordinary physics teacher. Cant our financial experts and boasted bureaucrats simplify the system, do away with all exemptions and adopt simple rules so that they can catch the evaders easily? Income is income whatever the source, and reasonable rates would induce everyone to pay tax rather than find devious methods to avoid it.

    REPLY

    MOHAN BHASKAR WAGH

    In Reply to ksrao 2 months ago

    BJP DESTROYED ENTIRE ECONOMY

    lalit

    2 months ago

    What about person dealing with stock market they will still be calculating manually for ltcg/ltcl as per grandfatheing method introduced in Jan 2018

    B. KRISHNAN

    2 months ago

    The complicated system was inherited by the FM, not her creation. All she is doing is to give an exit option from this complicated system, to those who consider it worthwhile, with no additional burden - or perhaps with some benefit. In any case, I am going to opt out of the "exemptions regime" as I no longer have to compulsorily buy low return MFs or insurance or some such instruments to claim 80CC etc.

    REPLY

    MOHAN BHASKAR WAGH

    In Reply to B. KRISHNAN 2 months ago

    THIS IS SIXTH BUDGET OF BJP.BJP HAS ALWAYS CREATED ALL COMPLICATIONS IN ALL BUDGETS

    Newme

    2 months ago

    Most of the Accountants and Auditors are Brahmins. The Brahmin Janata Party is creating more work for it\'s groups.

    REPLY

    MOHAN BHASKAR WAGH

    In Reply to Newme 2 months ago

    BJP IS. CONSISTS OF BIGGEST FOOLS

    B. KRISHNAN

    In Reply to Newme 2 months ago

    For Gods sake, lets not communalise income tax also! Why ML is allowing such posts beats me!

    sudhir.sr.rao

    In Reply to B. KRISHNAN 2 months ago

    I fully endorse. Such undeserving comments need to be CONTROLLED ,

    Sudhir Rao

    2 months ago

    I have been filing my IT Returns for 56 yers. And I rememberb the slab was starting at Rs 2500/- And there were different further exemptions for a narried person, one with one child, one with two or more children. Comparred to that, present system is a reasonable improvement over the older one.

    Deepak Narain

    2 months ago

    The writer has forgotten to include 'house rent' from permissible deductions.

    pravin banker

    2 months ago

    If the Government and the opposition are proposing solutions based on the stock market gyrations, they are sadly mistaken. The Indian markets do not trade in a cocoon. They are influenced by reactions in the USA and China markets. As the DOW/Nasdaq went up up up - led by a narrow handful of stocks trading at PE multiples of 100 or more (Chips like AMD, Streamers like Netflix, social media platforms like Google, Facebook, and Apple, and software like Microsoft) - the spillover effect influenced both Europe as well as India. Just look at the FX resrevs to see how much influence froeign capital has. So much foreign portfolio money in India as well as both Europe and China. The markets are in bubble territory and the news that Apple had shut ALL ITS CHINA stores because of the rapidly spreading Coronavirus (safety first as Cook always said) - the markets took a big tumble on Friday. The Virus is only the catalyst - as it spreads around the world, the markets will continue to slide and the buy on dips strategy employed by the various Algorithms will turn into a sell on rallies. No amount of government programs can halt this slide
    MAY TAKE several months to flush out the excess... Cash is King right now. ANDmargin debtors beware

    REPLY

    B. KRISHNAN

    In Reply to pravin banker 2 months ago

    Now, this is the kind of analysis which is very helpful to laymen like me. Thanks Pravin.

    ASHISH MAHESHWARI

    2 months ago

    Very true Nikhil.

    This govt's words and deeds are very different budget after budget. I still remember in one of the earlier budgets, Arun Jaitley said that the burden on honest tax payers need to be reduced and just two sentence later, he introduced surcharge on higher tax payers. Today, Sitaram said that she wants to make life simple for taxpayers and in the very next sentence made everything more complex.

    They say, wealth creators have to be respected but goes on the increase tax on equities (STT+LTCG, double tax on dividends, etc).

    They want to promote housing and domestic tourism but take away both HL interest and LTA benefits in these supposedly simplified tax slabs....

    Very strange.

    REPLY

    Sachin Krishna Telang

    In Reply to ASHISH MAHESHWARI 2 months ago

    Good observation Ashish !

    Dinesh Bhaskar

    In Reply to ASHISH MAHESHWARI 2 months ago

    well said! so true!

    A totally confused Finance Minister!!

    SRA

    In Reply to ASHISH MAHESHWARI 2 months ago

    Brilliant Analysis...

    Budget 2020: Income Tax Slabs Increased to Give Some Reprieve to Taxpayers
    Finance Minister Nirmala Sitharaman on Saturday announced some tax relief for individuals in the Budget 2020 by increasing number of tax slabs by two and tax rates increasing 5% in each slab till 30% for highest taxpayers.
     
    However, main beneficiary from this are those with taxable income near the lower threshold as their tax burden is reduced by 10% compared with others who get 5% tax relief. For example, those earning an income of Rs5 lakh to Rs7.5 lakh will now pay a tax of 10%, while those earning Rs7.5 lakh to Rs10 lakh will pay a tax of 15% against a tax of 20% at present. 
     
     
    In the new tax regime, tax benefit will accrue to a taxpayer depending upon exemptions and deductions claimed by him. For example, a person earning Rs15 lakh in a year and not availing any deductions will pay only Rs1,95,000 as compared to Rs2,73,000 in the old regime. Thus, his tax burden shall be reduced by Rs78,000 in the new regime. He would still be the gainer in the new regime, even if he was taking deduction of Rs1.5 lakh under various sections of Chapter VI-A of the Income Tax Act under the old regime, the minister says.
     
    The new tax regime shall be optional for taxpayers, Ms Sitharaman says, adding, an individual who is currently availing more deductions and exemption under the Income Tax Act may choose to avail them and continue to pay tax in the old regime.
     
    According to the finance minister, the new personal income tax rates will entail estimated revenue foregone of Rs40,000 crore per year. "Measures have been initiated to pre-fill the income tax return so that an individual who opts for the new regime would need no assistance from an expert to file his return and pay income tax," she added.
     
     
    Ms Sitharaman says she had reviewed all exemptions and deductions, which got incorporated in the income tax legislation over the past several decades. Currently more than one hundred exemptions and deductions of different nature are provided in the Income Tax Act. She said that she has removed around 70 of them in the new simplified regime. The remaining exemptions and deductions would also be reviewed and rationalised in the coming years, with a view to further simplifying the tax system and lowering the tax rate, she added.
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    COMMENTS

    BR

    2 months ago

    Is Senior Citizen exempted from Income Tax by any sum?

    Deepak Narain

    2 months ago

    There is no mention about Senior Citizens! In the previous Budget, Income Tax exemption-limit for them was raised to Rs 5 lakh. We hope, this will continue to hold good even now. Will the authorities kindly clarify? All Seniors will be worried about it.

    Ramesh Poapt

    2 months ago

    rate for income upto 5 lacs shown as 5% in new and old rates, means
    no change upto 5 lacs? !

    GST portal problems face flak from filers, date extended by 3 days
    Following a barrage of embarrassing complaints about the GST portal not working and lakhs of returns pending, the Central Board of Indirect Taxes and Custorms (CBIC) has extended the dates for filing GSTR-9 and GSTR-9C forms for three days.
     
    "Considering the difficulties being faced by taxpayers in filing GSTR-9 and GSTR-9C for FY 2017-18 it has been decided to extend the due dates in a staggered manner for different groups of states to 3rd, 5th and 7th February 2020 as under. Notifications will follow", CBIC said in a late night tweet.
     
    In Group 1 are the states of Maharashtra, Karnataka, Goa, Kerala, Tamil Nadu, Puducherry, Telangana, Andhra Pradesh for whom the due date will be February 3.
     
    In Group 2 are the states of Jammu and Kashmir, Himachal Pradesh, Punjab, Chandigarh, Uttarakhand, Haryana, Delhi, Rajasthan, Gujarat for whom the due date is February 5.
     
    Group 3 has the states of Bihar, Sikkim, Arunachal Pradesh, Nagaland, Manipur, Mizoram, Tripura, Meghalaya, Assam, West Bengal, Andaman & Nicobar Islands, Jharkhand, Odisha, Chhattisgarh, Dadra and Nagar Haveli and Daman and Diu, Lakshadweep, Madhya Pradesh, Uttar Pradesh who have to file by February 7.
     
    The staggering of the returns will ensure that the load on the GST portal is spread out over a few days rather than everybody filing on the last date.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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