The Latest Tax Developments in India: Insights from Tax Consultants
The Indian government has always been planning and implementing strategies to improve the Indian economy. One such plan is Tax Development.
Whether you’re a startup, business, organization, or employee, it’s always important to be aware of the latest developments in the country, especially related to taxes. Everyone has to pay taxes as the government uses them for carrying out welfare schemes.
There have been many changes in this sector, including the inclusion of Goods and Services Tax (GST) and deduction in employee tax. Therefore, understanding the importance of the topic, we curated this article with the help of a knowledgeable and informative tax consultant in India.
The New Tax Regime Will Now Be the Default Standard
Earlier, taxpayers had to choose between the new and old tax regimes. They can still choose the old regime, but now the default regime is the new one.
Individuals with businesses must opt for the new tax regime. It is mandatory. However, an individual taxpayer can opt for the old tax regime in any year for which they have a business or professional income. It can be exercised only once in a lifetime.
The Tax Rebate Limit Is Up by 7 Lakhs
There is some relief for people with an annual salary below Rs 7 lakh. As per the new regime, they will be exempted from paying taxes. Earlier, the tax rebate limit was Rs 5 lakh. This decision has provided them with much-needed financial breathing room.
Standard Deduction Extended to the New Tax Regime
While the standard deduction for salaried individuals is now Rs 50,000, with the new regime, it would become Rs 52,500 for people with a salary of INR 15.5 lakhs and above. Employees can claim this benefit, which will help them reduce the amount they need to pay for the tax. This much-needed benefit has been extended to a new tax regime that can help them save on tax bills.
New Income Tax Slabs
There are a few changes seen in new income tax slabs. The old tax regime remains the same, wherein a 5% tax was deducted for people earning between Rs 2.5 lakh to Rs 5 lakh. In the new tax regime, the taxation will start from Rs 3 lakh to Rs 6 lakh with 5%, and people with income above 15 lakhs will have to pay a tax of 30%.
Leave Travel Allowance (LTA)
In the old regime, the Leave Travel Allowance for private employees was limited to 4 years with Rs 3 lakh encashment, i.e., an employee could claim benefits once every 4 years. But, with the new LTA, employees can now claim benefits of Rs 25 lakh once yearly.
No Indexation Regime
The Finance Bill introduced no indexation on debt mutual funds. It will benefit the investors as they will be taxed only on smaller amounts of capital gains. The new no-indexation regime can lead to lower tax liabilities for investors in debt mutual funds.
Taxable Life Insurance Policies
In the old tax regime, the proceeds of life insurance policies were paid to the beneficiaries without any tax. Now, these proceeds with over Rs 5 lakh benefits would become taxable.
The Savings Limit Has Been Increased for Senior Citizens
Earlier, the deposit limit for the senior citizen saving scheme was Rs 15 lakh, with a monthly income deposit of Rs 4.5 lakh. But now, the limit has increased to Rs 30 lakh with Rs 9 lakh as a monthly income deposit.
Insights from Tax Consultants
The new tax regime will benefit individuals by increasing compliance and transparency toward tax laws. New and better benefits like tax rebate limits that will benefit employees with low annual income and changes in tax slabs will give relief to taxpayers. However, businesses will have to consider these changes for their operations carefully.
Different industries and sectors will have to go through changes. For example, manufacturing and export industries rely heavily on tax incentives, whereas the retail and real estate industries depend on tax rates and slabs.
Tips You Can Follow to Adapt to the Latest Tax Changes
Here are a few tips that can help you adapt to the latest tax changes:
- Understand how these changes in tax laws and regulations can benefit you or affect you.
- Evaluate how these changes are different from the previous tax regime.
- If you need help understanding the new tax rules and regulations, take the help of a professional who can advise you on how to maximize your savings and avoid penalties.
Now, you might be thinking about which tax regime is better and which one you should choose. The revised tax regime is better, with many benefits like low taxes and increased government revenue.
The new tax development is here, with short and long-term impacts and positive ones outweighing the negative. However, it’s a good idea to understand the tax rules and regulations. The tax consultants also advise staying up-to-date with the latest tax developments to minimize tax liabilities and increase savings. It’s always better to adapt to the changes with time.
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