By the Editor: Siddharth Sehgal
February in India is the budget season and this time when the expectations were high that the budget will bring some goodies for the middle class but as with many no good ministers in the current cabinet, the Finance Minister came up with a new personal budget plan which seem more like dish cooked at the last minute with leftovers.
In India, we don’t have that many tax payers because most of the people don’t make enough money to be asked to pay up dues from their meager living and among those who do make good money, many find incredible ways to fool the taxman. So you end up with mostly salaried middle class folks who pay a good part of their income to the government. Personal taxes make a small percentage of government earnings and the government mostly gets its paycheck from corporate and indirect taxes but it would actually benefit the economy if we can simply do away with personal taxes or reduce it to a single digit number. In fact, it would not hurt government to make all personal taxes in single digit because they will anyway get their due with indirect taxes but some of the ministers have expertise in ruining everything they touch.
Under the new tax regimen government lowered the interest rate but somehow they thought of making this scheme more attractive by removing all the deductions. The NPS, ELSS, PPF even the HRA, all the deductions which incentivized middle class to save for the rainy day have gone under the new system and as a consolation the old tax system will continue in parallel and people will have option to choose but, for how long? Deductions are the reason many people invest in instruments like life and medical insurance, my pensioner dad still has his home loan going on because it helps him in saving the tax on his pension but this tax structure takes away everything from people like my dad and later on when the new system will be the only choice left, people will actually stop spending at every level.
A person making 8 lakh per annum will actually end up paying more without deductions in the new system. This will actually dent the already reeling economy rather than revive it. The government needs to act with common sense while making policy decisions. They need to give people some leeway rather than implementing half baked economic policies.