The Tax Gambit
Context: Much ink has been spilled by now on the Budget’s hike in the tax-free ceiling under the new income tax system introduced in 2020, to ₹7 lakh from ₹5 lakh, with lower tax rates for those who give up existing tax exemptions. Experts Concerns on take away of the old tax regime:
- Exemptions “give some social security to the middle class” altogether will be affected.
- May affect the savings rate and hit investments.
- Lower income earners do not save enough to avail the tax-exemptions and end up paying higher rates.
- India’s literacy and financial literacy levels mean many taxpayers cannot deem the right mix of consumption and savings.
- Inflation beating investments.