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New taxes regime !!! : how impacts people

Prabhjot Singh July 25, 2024 4 min read

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The recent Indian government budget has sparked mixed reactions, mostly critical. Although it aims for economic growth through substantial infrastructure funding, critics argue this comes at the expense of crucial sectors like healthcare and education. The healthcare sector, still reeling from the pandemic, received inadequate support, and the education sector saw insufficient funding for digital infrastructure. New taxes, particularly on fuel, are also controversial, as they are expected to raise transportation costs and the prices of essential goods, placing a burden on the common populace during tough economic times.

Increased Deduction on Employer’s Contribution to Pension Scheme

section 80 CCD provides a deduction for the employer’s contribution to the Pension scheme up to 10%. Budget 2024 has now increased the limit deduction limit to 14% of the salary of the employee during the previous year.

STT on Futures and Options

The Security Transaction Tax (STT) on futures has been raised from 0.0125% to 0.02%, and on options, it has increased from 0.0625% to 0.1%.

Other Direct Tax Updates

1.Reopening of Income Tax Returns (ITR): Assessments can only be reopened beyond three years from the end of the assessment year if the escaped income exceeds Rs 50 lakh, with a maximum period of five years. For search cases, the time limit has been reduced from ten years to six years.

2.Income Tax Appeals: To decrease the number of pending cases, the monetary thresholds for filing tax dispute appeals have been increased to Rs.60 lakh for tax tribunals, Rs.1 crore for high courts, and Rs.2 crore for the supreme court.

3.Vivaad se Vishwas Scheme: This scheme has been reintroduced to help settle income tax disputes and reduce litigation.

Differences Between the Old and New Regime

The new budget has introduced several changes compared to the previous regime. One of the most notable differences is the shift in tax structure. The new regime offers a simplified tax filing process with reduced rates but removes most deductions and exemptions. This change is intended to streamline the tax system and make it easier for taxpayers to comply. However, many middle-class families, who rely heavily on these deductions for tax savings, feel that they will end up paying more under the new regime.

Positive Aspects of the New Budget

Despite the criticisms, there are a couple of positive aspects worth noting. Firstly, the focus on infrastructure development is expected to generate employment opportunities. Large infrastructure projects require a substantial workforce, which can help reduce unemployment rates and stimulate economic activity.

Secondly, the government’s push for digitalization is a step in the right direction. By investing in digital infrastructure and promoting digital payments, the budget aims to enhance financial inclusion and make it easier for businesses to operate. This focus on digitalization is expected to improve efficiency and transparency in various sectors of the economy.

Impact on the Middle Class

The middle class, often considered the backbone of the Indian economy, is likely to be significantly affected by the new budget. The removal of tax deductions and exemptions under the new tax regime will lead to higher tax liabilities for many middle-class families. These families, who have been struggling with the rising cost of living, will find it harder to manage their finances.

Additionally, the increase in fuel taxes will have a ripple effect on the cost of essential goods and services. Higher transportation costs will lead to increased prices for daily necessities, putting further strain on the middle class. This, combined with the lack of significant support for healthcare and education, leaves the middle class feeling neglected and overburdened.

People’s Reaction Towards the Budget

The new budget has been met with widespread criticism, with many feeling that the government’s priorities are misplaced and fail to address immediate needs. Social media is rife with negative comments reflecting public dissatisfaction.

Healthcare professionals are notably vocal, arguing that the budget neglects to strengthen healthcare infrastructure despite lessons from the pandemic. Educators and students are also disappointed, citing insufficient investment in digital infrastructure, which exacerbates the urban-rural education gap.

The increase in fuel taxes has sparked significant backlash, with concerns about a rising cost of living and additional financial strain on struggling families. Public sector employees are worried about job security due to disinvestment plans, leading to protests and strikes despite government assurances of economic growth.

Farmers, already protesting for months, feel betrayed by the budget’s lack of substantial support for agriculture, further fueling their demands for more robust support and reforms.

NEW TAX SLABS

INCOME	TAX RATE
UPTO 3 LAKHS	NIL
3-7 LAKHS	5%
7-10 LAKHS	10%
10-12 LAKHS	15%
12-15 LAKHS	20%
15 LAKHS ABOVE	30%

Conclusion

The Government of India’s new economic policy focuses on growth through infrastructure development but is criticized for neglecting health, education, and agriculture. New taxes and asset sales have reduced public support. To regain trust, the government must balance development with public welfare.

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know more about tax regime : https://en.wikipedia.org/wiki/New_Tax_Regime