Indian Economy News & Discussion - Nov 27 2017

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arshyam
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Re: Indian Economy News & Discussion - Nov 27 2017

Postby arshyam » 01 Feb 2019 14:14

Saar, my vote is still for Modi as I see the larger picture. I cannot say the same for a lot of other salaried people who are generally supportive of Modi, but may have no incentive to come vote this year. Anyway, let's see what the fine print says..

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby JayS » 01 Feb 2019 14:44

nash wrote:
Rupesh wrote:^^
Only platitudes for salaried class. This is the second consecutive disappointing budget .


Rupesh wrote:Full tax rebate up to 5 lakh. :D
Standard deduction increased to 50k and interest income 40k exempted, earlier it was 10k.


NOM but this type of reaction is everywhere in social media ... :lol:


Because people jumped the guns before hearing the full deal.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby nam » 01 Feb 2019 15:28

Rupesh wrote:Defense budget increased by 1%. Doesn't even beat inflation.


I actually support this. It is time our services realize OROP, Importing foreign toys and trailing for perfect desi kit cannot go together.

They want modernization, ask DRDO & Indian industries to develop kit.

Crib how GoI is not funding DRDO, rather than more money for TFTA kits..

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Schmidt » 01 Feb 2019 17:54

Rupesh wrote:Full tax rebate up to 5 lakh. :D
.


----------------------------------------------------------------------------------------------------

The tax rebate is only applicable if your income is less than 5 lacs ( nett of deductions )

In case your taxable income crosses this level then the regular existing tax slab rates of 5%, 20% and 30% plus cess and surcharge will apply.

It is a very specific concession aimed at the lower middle class and not for the general population

At any rate the savings is only 12500 Rs per annum , so no great shakes

Plus the tax slabs / rates are all skewed up now

Any way , small mercies for the middle class

I guess it is also difficult to expect more , as the govt seems to be expanding its social sector expenses in the form of more dole to the poor

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby ArjunPandit » 01 Feb 2019 18:05

Rupesh wrote:Defense budget increased by 1%. Doesn't even beat inflation.

hope you know economy grew by 11% nominally (6% real) so that comparison is meaningless. In the same light as comparing it with the size of entire pakistan. We have to cater to the threats from China which has to both manpower and eqpmnt intensive due to chinese.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby arshyam » 01 Feb 2019 18:19

"At any rate the savings is only 12500 Rs per annum , so no great shakes"

All the more reason to have announced a uniform deduction. Would have made foe better optics in an election year. Not increasing 80C was also a miss at a time the government is trying to spend a lot on infra.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby deejay » 01 Feb 2019 18:29

Schmidt wrote:
Rupesh wrote:Full tax rebate up to 5 lakh. :D
.


----------------------------------------------------------------------------------------------------

The tax rebate is only applicable if your income is less than 5 lacs ( nett of deductions )

In case your taxable income crosses this level then the regular existing tax slab rates of 5%, 20% and 30% plus cess and surcharge will apply.

It is a very specific concession aimed at the lower middle class and not for the general population

At any rate the savings is only 12500 Rs per annum , so no great shakes

Plus the tax slabs / rates are all skewed up now


Any way , small mercies for the middle class

I guess it is also difficult to expect more , as the govt seems to be expanding its social sector expenses in the form of more dole to the poor


The "general population" is the lower middle class.

https://twitter.com/dhaval241086/status/1091308218964471808

Anyways, Rs, 12,500 as % of annual tax even for someone paying Rs. 1,25,000 tax per annum is 10% and this 10% is indeed huge.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Supratik » 01 Feb 2019 18:31

The 5 lakh is the exemption limit for everyone. Up from 2.5 lakhs earlier. You don't have to pay tax if your income is 6.5 lakhs provided you invest the excess amount in securities and PF. Will confirm from news report.

This IT relief covers 95% of IT payers. If your salary is more than 10 lakhs per year you are only a few million in a country of 1.3 billion. That is how poor India is. If your salary is 50 lakhs per year and you were expecting a reduction in tax rate that is unlikely to happen anytime soon no matter who is in power.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby deejay » 01 Feb 2019 18:39

arshyam wrote:Saar, my vote is still for Modi as I see the larger picture. I cannot say the same for a lot of other salaried people who are generally supportive of Modi, but may have no incentive to come vote this year. Anyway, let's see what the fine print says..


I am voting Modi and I am a vehement supporter. No one can be pleased a 100% and a nation building leader can't afford to keep pleasing people. Economies don't grow by doling out freebies. What I like here is the directed relief to those deserving - be it Mudra, Jan Dhan, LPG connections and now the 5 Lakh bracket. I see a lot of people (pro INC?) complaining at higher income groups not being covered and they are also the ones saying that too many doles are being handed out in the same breath.

May 2019 is the 4th battle of Panipat (IMHO) civilisationaly. We all will vote for the side we believe in. With the budget done the next important data from economic point of view before election should be GDP numbers for the current fiscal. Another important discussion is the jobless growth narrative. I say narrative because the numbers are yet to be declared officially. EPFO data does not bare out the jobless growth story.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Supratik » 01 Feb 2019 18:41

Thankfully they have not introduced a socialist UBI. I am against UBI unless it is linked to some productive activity. I think a minimum wage is better. What they have done is given a UBI to farmers (6000 per year) but farming employment is decreasing by roughly 1% a year. This subsidy is unproductive but has less long term consequences as people will continue to leave farming and it will eventually go below 10% of labor force. They have given some social security to the unorganized sector in terms of pension.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Singha » 01 Feb 2019 18:47

EPFO is where TDS money goes, and people will guard their money. its a reliable indicator of organized sector. but bear in mind there is a minimum limit of employees under which there is no need to pay PF like 50 or 100. and I doubt a lot of "informal" things like seasonal labour, brick kilns, construction small crews, machining shops, etc anyone is able to accurately track.
also a lot of large corporates have private corporate trusts for PF and do not use EFPO though they share some info.
eg if a co with 55,000 staff hires 5000 more, it can all remain hidden in the pvt PF trust.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby JayS » 01 Feb 2019 18:51

Schmidt wrote:
Rupesh wrote:Full tax rebate up to 5 lakh. :D
.


----------------------------------------------------------------------------------------------------

The tax rebate is only applicable if your income is less than 5 lacs ( nett of deductions )

In case your taxable income crosses this level then the regular existing tax slab rates of 5%, 20% and 30% plus cess and surcharge will apply.

It is a very specific concession aimed at the lower middle class and not for the general population

At any rate the savings is only 12500 Rs per annum , so no great shakes

Plus the tax slabs / rates are all skewed up now

Any way , small mercies for the middle class

I guess it is also difficult to expect more , as the govt seems to be expanding its social sector expenses in the form of more dole to the poor


We will have to wait for any official explanation or Final budget. If this is indeed the case, then this is exactly the kind of rebate that was earlier there for taxable income up to 5L. It was flat 2500 or 3000Rs IIRC. 3.5L of 2500 u/s 87A. Now it would be 12,500/- Max till 5L. So this is in effect section 87A mod, not tax slab.

PS: PG did say in his speech, the existing tax slabs will continue next year. Which means this is specific rebate for <5L taxable income. :(

In general, this is mere interim budget, it would be bit early to call it a good or bad budget.

On Defense side we will have to see how much is Capex and how much is opex. The issue is complex and considering budgeted number only is too small a data for any serious analysis. Given our increasing desi system procurement, the forces are getting better bang for the buck to some extent as desi systems are cheaper than imports. One thing that Modi govt failed to implement was "roll on" budget for MoD. The proposal is being tossed around since ABV govt had it first time in 2003 or so. If this is implemented, the AFs will get additional 10-20K Cr for Capex as this kind of money is returned unspent every year (its a significant amount for yearly Capex given majority of the 3L Cr money is spent in Opex). Another factor to look at it is, how much money MoF blocked from being spent so it could balance its sheets. Because its seen that MoF may veto MoD on procurement proposals, despite them being budgeted.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Supratik » 01 Feb 2019 19:12

Exemption limit has been raised. Slabs will remain same but your effective tax will come down. Here are the details.

https://timesofindia.indiatimes.com/bus ... 791160.cms

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Supratik » 01 Feb 2019 20:19

Although I see no data on expenditure and future tax collection yet it is amazing that fiscal deficit has been kept at 3.4% of GDP even with all these SOPS. The other point is at 1 lakh crore approx the GST will deliver 12 lakh crore approx (5.5 % of GDP), 12 lakh crore direct tax (5.5% of GDP) and add 2% approx for other taxes like petroleum then our tax to GDP ratio comes to approx 13% which is pretty good at our stage of economy. It will grow as more people come into the formal sector (direct tax) and salaries/wages increase and there is more consumption (indirect tax). The only thing remaining is to get self-employed people into the tax net which is a political hot potato but will need to be done at some stage.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby JayS » 01 Feb 2019 20:40

Supratik wrote:Exemption limit has been raised. Slabs will remain same but your effective tax will come down. Here are the details.

https://timesofindia.indiatimes.com/bus ... 791160.cms


You are contradicting yourself. Exemption limit is not raised. Had that been the case, it would have meant tax slabs are tweaked.

What FM has done is he is proposing "Rebate" u/s 87A. It exists even today. But its for <3.5L income and max 2500Rs. It would be now <5L and Max 12.5k effectively nullifying any tax.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Supratik » 01 Feb 2019 20:52

I don't understand what you are saying. So someone with 5 lakh income will not pay tax but someone with 10 lakh will start paying tax from zero. In which country does that happen?

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby JayS » 01 Feb 2019 20:54

Supratik wrote:I don't understand what you are saying. So someone with 5 lakh income will not pay tax but someone with 10 lakh will start paying tax from zero. In which country does that happen?

Yes. In fact if you have taxable income of 5000001/- you will pay full tax with 5% rate.

I re-checked Budget speech. PG was quite clear on this is "rebate" and existing slabs will continue. This means only one thing - tweak in sec 87A.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Supratik » 01 Feb 2019 20:57

Full tax on what?

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Uttam » 01 Feb 2019 21:01

JayS wrote:Yes. In fact if you have taxable income of 5000001/- you will pay full tax with 5% rate.

I re-checked Budget speech. PG was quite clear on this is "rebate" and existing slabs will continue. This means only one thing - tweak in sec 87A.


This would be highly unusual. This goes against the very nature of a progressive taxation system. I am certain that this would not be the case. If you earn Rs 500,001, then you will be liable to 5% rate only on the Rs 1 and not the entire amount.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Supratik » 01 Feb 2019 21:03

Yes, exactly.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Uttam » 01 Feb 2019 21:05

Uttam wrote:This would be highly unusual. This goes against the very nature of a progressive taxation system. I am certain that this would not be the case. If you earn Rs 500,001, then you will be liable to 5% rate only on the Rs 1 and not the entire amount.


May be I am wrong:

Union Budget 2019: Income tax rebate of Rs 12,500 to those who earn up to Rs 5 Lakhs from April 1, says CBDT Chairman

This needs a closer look by some tax expert!

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby dnivas » 01 Feb 2019 21:14

Uttam wrote:Though small, it is still an improvement. I'll take it!

India improves its ranking on global corruption index in 2018: Study

India has improved its ranking on a global corruption index in 2018, while its neighbour China lagged far behind, according to the annual index released by an anti-graft watchdog on Tuesday.

India rose by three points to 78 in the list of 180 countries in the world, while China ranked 87 and Pakistan 117 in 2018, the Transparency International said in its Corruption Perceptions Index (CPI) for 2018.
....................


link to index for 2018. wow 2 countries in south africa with relatively good scores and beats south africa. didnt realize chile and uruguay were relatively corruption free as well
https://www.transparency.org/cpi2018

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Supratik » 01 Feb 2019 21:27

It is unlikely that they will give exemption to one group of people (they are calling it rebate but it is effectively an exemption) and not to another group. This means the middle class above 5 lakh don't get that rebate or exemption i.e. no benefit. Highly unlikely.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Supratik » 01 Feb 2019 21:56

5% tax on 5 lakh minus 2.5 lakh comes to 12500 rupees. Which is the "rebate" that they are going to give. The question is will it be given to only those earning 5 lakh or less or to every IT payer.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Uttam » 01 Feb 2019 22:01

From what I have read so far, it seems the benefit is only to those earnings less than 5 lakhs. I would love to be proved wrong!

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Supratik » 01 Feb 2019 22:06

From twitter

Gross salary 985000
less std deduction 50000
gross taxable income 935000
80C deduction 150000
80 CCD(1B) 50000
80D 25000
80 TTA 10000
Interest on home loan 200000
taxable income 500000
total tax 0

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Supratik » 01 Feb 2019 22:35

I am wondering whether the tax rebate is for 2018-2019 as I see no point in giving a rebate upfront for 2019-2020 and then deducting it from salary. If it is not deducted then it becomes an additional income subsidy.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby syam » 01 Feb 2019 23:29

Uttam wrote:From what I have read so far, it seems the benefit is only to those earnings less than 5 lakhs. I would love to be proved wrong!

You have to pay tax only if your taxable income exceeds 5 lakhs.

It's not total earnings. You can earn 10 lakhs and do 5 lakhs smart investments and deductions. Your taxable income will be 5 lakhs then.

This is huge thing as you can spend 40k money(medical, rent and such not included) every month without worrying about tax and things. Rest of your salary, you can invest.

If taxable income exceeds 5 lakhs, we don't get any benifit. We have to pay that 5% tax on second 2.5 lakhs. It was 10% in past. They reduced it to 5% last year.

Most of the salaried people earn 7 - 8 lakhs most. It is Modiji way of teaching new middle-class younger generations how to 'evade' tax legally and also save money.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby disha » 02 Feb 2019 02:19

Schmidt wrote:The tax rebate is only applicable if your income is less than 5 lacs ( nett of deductions )


That is @8 lakhs after deductions.

Let us say I am earning Rs. 1 lakh/month., then the tax even at 10% slab on 4 lakhs after deductions will come to Rs. 40,000.

Are you telling me that @50,000 Rs/month *take home* in cash does not make a middle-class living wage in India? Do not bring in Mumbai or Bengaluru or Delhi.
Last edited by disha on 02 Feb 2019 02:25, edited 1 time in total.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby disha » 02 Feb 2019 02:24

JayS wrote:We will have to wait for any official explanation or Final budget. If this is indeed the case, then this is exactly the kind of rebate that was earlier there for taxable income up to 5L. It was flat 2500 or 3000Rs IIRC. 3.5L of 2500 u/s 87A. Now it would be 12,500/- Max till 5L. So this is in effect section 87A mod, not tax slab.

PS: PG did say in his speech, the existing tax slabs will continue next year. Which means this is specific rebate for <5L taxable income. :(


It will be very difficult for a any government coming in next election to remove the above one time rebate. If current government comes back, they will confidently put it in perpetuity. If totally new government comes back, they will have to figure out whether to continue with current government's one-time sop to middle class or expand on it. If they do the later, they will put a hole in their budget given their profligacy. And this is something they cannot discontinue unless they call the lower middle class as rich. This is a smart move.

Edited: Removed political references.
Last edited by disha on 02 Feb 2019 03:38, edited 2 times in total.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby disha » 02 Feb 2019 02:30

Schmidt wrote:At any rate the savings is only 12500 Rs per annum , so no great shakes


You must be really rich to consider Rs. 12500 per annum savings as "no great shakes"! It will buy a new shiny samsung 192 litre single door refrigerator!

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 02 Feb 2019 02:42

Please be judicious in your reference to political matters. This is not the thread for politics and therefore please focus on the economics of the budget rather than any political characters.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Karan M » 02 Feb 2019 03:32

I'll only step in here for one thing. The deduction is indeed as what JayS and Schmidt note.

If your income extends past Rs5L, then the normal tax rates apply.

Unfortunately, all the concessions vis a vis deductions on NPS, home rent etc to portray a 10L etc income as being tax free are quite disingenuous because given cost of living concerns in India, and the lack of a safety net, few will or can lock up all their excess income above expenses, in deduction oriented instruments.

The manner in which the Govt has done this, has been deeply disappointing to many, and the usual WhatsApp et al angry forwards have begun. Thankfully, the expansion of the standard deduction to Rs 50,000 from Rs 40,000 has been a mitigating issue.

Having said that, people have already chosen sides and this issue (I think, hope) will not be a significant electoral issue. I agree fully with what Deejay has so forcefully and articulately conveyed.

Thankfully, the Govt did not break the bank in the name of rural distress and hence this issue is not going to (hopefully) stand as yet another example of ignoring the middle class.

There is also a coordinated effort to roil the economy, Cobraposts "expose" of DHFL has also increased concerns.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby disha » 02 Feb 2019 03:55

^I think your reading on the tax deduction is incorrect.

Yes, tax is applied on income exceeding Rs. 5L.

However tax is applied on net income exceeding Rs. 5L after net deductions.

Here is one link which talks about it https://swarajyamag.com/economy/three-game-changers-in-pm-modis-budget-for-farms-middle-class-unorganised-labour

Under the new budget, which no future government will be able to overturn, the tax exempt limit rises to Rs 5 lakh in the form of a rebate, which means the exemption is only for this year and the tax base remains intact. The tax rebate will not be available for those earning more than Rs 5 lakh. The standard deduction rises to Rs 50,000 from Rs 40,000. If you own a second house, there will be no tax on notional income from it. The gratuity limit rises to Rs 20 lakh, a kind of post-dated cheque.

The tax breaks mean the middle class gets nearly Rs 7.5 lakh of tax-free income, if one takes the deductions from taxable income into account. To the basic exemption, we must add the 80C deductions of Rs 1.5 lakh, Rs 50,000 as additional contribution to the national pension scheme plus the higher standard deduction. This excludes any contributions to medical insurance premia. The total tax-free income is thus pretty close to the Rs 8 lakh income limit for the new 10 per cent quota for the economically weaker sections legislated last year.


Sir, either Swarajyamag/Jaggi did not do their research and are incorrect or your reading is incorrect.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Karthik S » 02 Feb 2019 07:37

World Index@theworldindex
Follow Follow @theworldindex
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Best Countries for Quality of Life, 2019:

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(US News)


As quality of life is in big part determined by economy, posting here.
Pleasantly surprised to see India at 34. With good government, I think we can break into top 25 in next 10 years.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby V_Raman » 02 Feb 2019 08:31

IMO the biggest issue for quality of life in India is sanitation.

On the budget - it makes sense to align the tax free bracket to the amount used for 10% quota income limit - 8L/year. The only way to do that is by the rebate. Doing that by increasing the exemption limit would substantially reduce the tax base.

10% quota with incentive to save for the future - master stroke me thinks!

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Supratik » 02 Feb 2019 10:27

The whining about the new taxation is mostly coming from those who are in the high income bracket and don't need that tax break or don't care about 12500 rupees. Someone commented it is only two movie tickets per month. Those who pay 400 rupees for movie tickets every month are a very small fraction of the total population notwithstanding the 1 crore apartments. I am not sure what do these people mean by tax breaks. Most IT payers in India are covered by this tax break and will be happy.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby nash » 02 Feb 2019 11:54

As per CBDT in AY 2017-18, No. of returns in different gross total income ranges:

5-5.5L : ~24 Lakh returns
5.5-9.5L: ~ 90 L returns
9.5-10L: ~ 5 Lakh returns

And if some one is claiming both HRA and house loan interest, then some percentage of this range:
10-15L: ~25 L returns.

As we can see there are good amount of people who can benefit from this move.

15L-5Cr: ~24 L returns.

so there can be around 45Lakh people out of ~5 crore taxpayer have to pay taxes as per existing slabs, only benefit is increase of SD limit and threshold of bank interest.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Karan M » 02 Feb 2019 11:59

disha wrote:^I think your reading on the tax deduction is incorrect.

Yes, tax is applied on income exceeding Rs. 5L.

However tax is applied on net income exceeding Rs. 5L after net deductions.


Kindly reread what I wrote. This entire dance about deductions reducing the income below 5L is meaningless for many families who can't afford the expenditure on the deduction in the first place. It's like using a 2L outgo on a house to claim that deduction to drive the net taxable income down, without acknowledging the fact that buying a house for the purpose of saving tax would be meaningless ( as versus those who could afford a purchase, have done so, and will use this deduction). Unlike 80C whose expansion would have provided more deduction options without significantly compromising liquidity.

" Unfortunately, all the concessions vis a vis deductions on NPS, home rent etc to portray a 10L etc income as being tax free are quite disingenuous because given cost of living concerns in India, and the lack of a safety net, few will or can lock up all their excess income above expenses, in deduction oriented instruments."

In short this is a tweak on the existing tax rules and slabs, not a change to the slabs themselves.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Karan M » 02 Feb 2019 12:04

Supratik wrote:The whining about the new taxation is mostly coming from those who are in the high income bracket and don't need that tax break or don't care about 12500 rupees. Someone commented it is only two movie tickets per month. Those who pay 400 rupees for movie tickets every month are a very small fraction of the total population notwithstanding the 1 crore apartments. I am not sure what do these people mean by tax breaks. Most IT payers in India are covered by this tax break and will be happy.


I do agree RS 12,500 by itself is not going to make or break a high income/tax slab individuals finances, but it was the optics around the whole messaging that has been consistently mismanaged by this Govt. My personal view is get a better understanding of your own financial situation and stop depending on any Govt for handouts. But the competitive desire to be acknowledged as worthy of assistance, has been sparked by Modi's constant pro-poor/ farmer/ SC-ST etc election oriented rhetoric and these issues take on a disproportionate role. In this case though, I hope not.

I am perennially disappointed by the lack of innovation or quick thinking around this Govts financial management via the budget. For instance, a 80C expansion via investment in selected infra budgets could have driven funds to critical programs and actually helped GOI in the short term, even with a moderate low coupon rate. Many don't invest in the NPS purely out of the long lock-in. Options like these could have been explored.


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