disha wrote:Karan M wrote:
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.
Sir, I think you are shifting goal posts from your original post to now go to a 80C based solution.
You were alluding that the expenditure of somebody earning @7.5-8.0 lakhs is so high that they will not be able to avail *any* meaningful deductions to avail any tax benefit. You did not present any data backing up your claim. You went into whatsapp's angry forwards and all the side show around that.
Disha, don't make silly posts about shifting goal posts and what not. First, you can't understand what has been written and instead of asking politely start getting very arrogant in your demeanor.
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.
And then you went on to claim that
Unlike 80C whose expansion would have provided more deduction options without significantly compromising liquidity.
What you are now stating that:
1. There will be *no* meaningful deductions for tax savings by somebody earning in @7.5-8.0 lakh per annum range to save @15k in taxes.
2. GOI only tweaked the rules and not change the slabs.
3. Expand 80C
For both 1 & 2, you have not provided any data. Item #3 is your solution which may or may not have its merits.
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Dude, do you even live in India or fill any Indian tax form to get so cock-sure about folks whose lifestyle concerns you seem completely ignorant of?
I fill these forms every year. I count my Rs and very well know the living expenses in the urban metros.
For instance, just poll anyone who has a family with one earning member a wife, 1-2 kids and elderly parents (many of whom don't even have pension). Living expenses per month easily average between Rs 50K to 80K. All depending on the compromises made.
Their LIQUIDITY is next to nil. Most don't even have emergency funds.
In this case, where is the leeway to sit & claim significant concessions by investing heavily into fixed income or locked in schemes of the kind the GOI has already introduced?
Regarding 1, the fact is self-evident, the average income left over is hardly enough to go-all into any significant investment plan.
Regarding 2, if you followed any news, it would be evident to YOU ALREADY, that the GOI didn't change any slabs. They just gave a deduction which only benefits people with income upto 5L, and moment they cross that deductions have to come into play and to add any deductions beyond that again depends on available excess income, circumstances, meeting all sorts of rules and regulations and SPENDING MONEY WHICH THEY DONT HAVE TO BEGIN WITH. For instance, its very easy to claim that folks should max out premium on medical insurance to claim deductions.
Fact, many families depend on work insurance to get around elderly parent commitments. No insurance company wants to touch elderly folks in India with a barge pole. The state owned PSUs have a few plans for super senior citizens and they come with so many tests and exclusions, they are meaningless! And what happens to these parents when the bread-earner no longer has corporate cover? This is the difference between REALITY and some copy-pasta newspaper article.
Regarding 3, fact is even under 80C, the only real benefit possible for folks who want a relatively liquid investment which at least provides some income (the great middle class hope, regular income) is to invest in fixed income instruments like tax saving FDs with a five year lock-in or a 3 year MF ELSS, which can be redeemed thereafter! Either ways, the liquidity hit is significant but can somehow be justified or managed by some families by cutting down heavily on expenses. The GOI could have extended this coverage anyhow, given DDT has mangled investment returns from Dividend Oriented funds (which along with LTCG has hit at 2 key areas where middle class was increasingly parking its funds, equity and equity MF). Further, as debt funds are also roiled by scandal after scandal, many with Govt regulators sleeping at the wheel so FDs are again in the news for "safety".
Lets look at EPF and PPF, PPF has a 15 year lock in and hence avoided by many families. EPFO is a disaster perception wise. More and more families are preferring to withdraw their entire corpus upfront, both because of the ham-handed way in which GOI went about trying to put new rules about it earlier, and also because withdrawals from EPF remain a black-box with literally very little progress made. NPS is no better, even with its new EEE status because it forces you to stay invested till 60, personal emergencies be darned, and then you are forced to reinvest at least partly in an annuity.
However, the GOI had a chance to ask people with more investing capability to invest in further areas beyond the NPS investment and expand 80C.
The average middle class investor who was earning ~10L and above, would also have benefited beyond the guys who took advantage of the deduction (~5L income). These folks could have been roped in to invest a bit more into ELSS or tax saving FDs. These would have done three important things.
First, given people the perception, the GOI cared about their needs and was maximizing their investment choices. This is a VERY BIG DEAL. Thanks to constant yammering about MF etc, people who can afford to are investing heavily in equity. These guys could have seen an excel stating "ah, the 50K extra I get out of 80C will amount to so 3x the amount in a decade and add up with each years investment! In practical terms, he is only saving ~15K at the highest slab (30%) but its a big step forward for his "retirement".
Second, it would have brought more money (domestic, retail) into the equity or fixed income markets (Indian equity and banks), both of whom are struggling with different issues and more capital would always be welcome. Former, beholden to FII, latter struggling with NPAs.
Third, this would have directly contributed to national goals. You are not just boosting non directed consumption (which might go to the next phone launch at Amazon, imported from China) but increasing the pool of money available to both domestic industry and domestic financial system without the GOI having to run to RBI or come up with complicated bail-outs.
Yes, GOI did not change the slab. What GOI has done is ability to move to a lower tax slab easier and meaningful.
Here, I am providing data on how a family earning @7.5-8.0 lakhs per year can avail the tax benefit of @15k by moving to a lower tax slab.
https://economictimes.indiatimes.com/we ... 792680.cms
"Here you are providing data".. sure, copypasting the usual stuff floating around WhatsApp university. No, GOI has NOT changed the slab. Guys like you making these absurd claims are the bane of people who try to make reasoned arguments. Govt has given a deduction under EXISTING slabs and left them UNCHANGED. Learn your tax codes and regulations before giving gyan to everyone else.
I can come up with similar rubbish like all these blogs and newspaper wallahs about how a family can survive on air, and claim all sorts of fancy deductions to somehow pay zero taxes.
Do you even realize that to claim a deduction, first the expenditure on "something else" has to be made. Many families can't even afford that.
Do check the table in the above link.
Here is what you *can* deduct from your 7.75 lakhs per annum salary:
1. Standard deduction of Rs. 50k
This is actually 10K, because the deduction of 40K already existed. Only thing is it was made standard in the previous budget and made +10K this time around. And the previous 40K subsumed both the travel allowance and medical exemption. No great freebie.
2. Rs. 1.5 lakhs per annum in 80C *OR* use tuition fees paid for children to claim a deduction of the same amount from the gross total income (or a mix of both) <- major expense for middle class is education, do find a teacher which gives you a receipt though or send them to educational institutes that give receipt
My goodness, there really is no sense in these sort of claims. 1.5L in 80 C exists already!!
And given the out of control rampant inflation in educational expenses, this sort of mix and match is at best a band-aid for most families.
3. Rs. 50 thousand in NPS 80CCD <- this is for your own future. Social net for retirement.
At this point its obvious to me, you have no idea about the topic and are just making the usual partisan claims.
First, this NPS 50K deduction has already existed for a while now.
Second, NPS remains highly unpopular beyond tax saving because of its limitations. Even EPF allows you to make a 75% withdrawal (one good thing done by the Govt) after a month of unemployment. The NPS corpus is locked in till 60. After which you have to deploy it partly to annuity products, most of which are still lousy.
In short, what exactly are you touting here, a "safety net" with significant flaws which policy has already existed.
4. Rs. 25 k premium for medical insurance (Section 80D). If you are paying for your parents insurance, your deductions can be higher. <- Social net for health
Another example of opinions completely at odds with urban reality in India! Do you even realize that for many families, even paying this 25K is a very big deal! Where will they spend the money to claim the deduction?
Second, that 25K option is meaningless for families with elders whose premium loading goes through the roof. I was just talking to a person whose "bank insurance" stopped and moving to a standard insurance, meant a premium of 20K per parent! He has elected to drop the whole thing for now, because he can't afford it, and is relying purely on his corporate floater insurance in which his entire family is now "covered". Matter of fact, if he wants to re-expand the cover to himself, his wife and children, by buying a secondary insurance, then he again has to spend alot more money and that parental deduction can't be adjusted against this expense and his "tax concession" via personal insurance in 80D, only expands to a fraction of money he spends ( you spend x, your effective money available is (slab rate)*x).
After all of the above (retirement, education, medical deductions), are you saying that Rs. 40,000 per month take home for everything else is not enough to live?
Your deductions are out of touch, just like the rest of your post which would be laughed out of the door if you took it to anyone serious managing with a ~7.5-8L income in any metro.
Till elections at least, please stop sharing such "opinions" in such a high handed manner with folks. All you'll do is ensure more votes for pappu and his ilk, while you sip your pina colada elsewhere patting yourself on your back about your "convincing skills".