the goan I network
PANAJI
Tax experts have said that people must be really careful when it comes to choosing between the existing income tax rates and the new rates announced in the Budget 2020-21. Finance Minister, Nirmala Sitharaman, has announced new tax rates, which are lower than earlier rates, but they don’t allow exemptions.
Simply put, people have an option to opt for higher tax rates but with exemptions or lower tax rates but without exemptions. Noted chartered accountants (CAs) of Goa are of the opinion that caution should be exercised while deciding which option to go for.
Ulhas Dhumaskar, CA, said, “For those whose income is from sources other than salary, for example interest on bank FDs, the new proposed tax rates may be better. Suppose you were making Rs 9 lakhs yearly income and all from bank interest. As per existing rules, you would pay 20% tax and you wouldn’t get any exemption because those are all for salary income. But, new rules allow you to pay tax at 15%.”
Actually, under Section 80C of the Income Tax Act, there are a lot of tax exemptions like for investment in provident fund, premium payment for life insurance, repayment of home loan principal amount and etc. But, these exemptions are only for salaried individuals.
In other words, if your income is from sources like bank interest, business income or dividend, you get no exemption under Section 80C. So for such individuals, lower tax rates under the new proposed rules make sense.
However, when it comes to salaried individuals, who are taking benefits of exemptions, it will depend from case to case as to whether they should opt for new rules or existing rules. Whichever rules they opt for, tax-experts advise that they should thoroughly check their tax obligation and only then take a decision.
Having said that, tax experts still felt that the new rules will bring some simplicity in the tax filing process.
Yatish Vernekar, CA, said, “The Central Government’s intention is to simplify income tax rules and therefore it’s a good move. As of now, there are a lot of exemptions, which make it tough to file returns.”
