00:00 And Puneet Shah who is a partner at Dhruva Advisors. Thank you so much Arnav and Puneet for joining in and for agreeing to do this.
00:09 I will start with you Puneet just to give us a sense of what could potentially come about.
00:15 In the past couple of budgets most of the changes have happened on the new tax regime which is the default regime right now.
00:23 Last year of course you had the standard deduction being introduced which was a major relief.
00:28 Can anything potentially be done more to make this more attractive for the taxpayer?
00:34 Yes Alex. I think there is a lot of expectation in terms of further amendments or liberalisation of the new tax regime.
00:44 It is a default regime as you rightly said. There are no deductions being offered under new tax regime.
00:53 You have tax rates which are much lower and therefore you get a tax-free income or tax exempt income up to Rs 7 lakhs under new tax regime.
01:06 However, the takers are not many and the reason being that some of the taxpayers are expecting some more deductions to be offered under new tax regime as well.
01:19 Even though that is not the basis of offering the new tax regime.
01:23 However, there is always a ask as to whether section 80C or section 80D deduction should also be extended to new tax regime.
01:33 That is one expectation and there is one ask or one demand.
01:37 The second ask or expectation is housing rate, the interest on the housing loan.
01:46 Whether that deduction also should be extended to new tax regime.
01:51 You have a substantial relief in the form of interest payment on the housing loan for a self-occupied property but that is only available under old tax regime.
02:01 Should it be extended to new tax regime as well?
02:05 The last one being the tax rebate. There is a tax rebate under section 87A which is being extended to old as well as new tax regime.
02:16 We have a higher amount under new tax regime.
02:19 The expectation is that the new tax rebate under new tax regime should be increased at least by say Rs 10,000.
02:28 So that the income up to say Rs 9 lakhs instead of Rs 7 lakhs could be tax exempt under new tax regime.
02:36 There are a few expectations. As you rightly said standard deduction was introduced last year.
02:41 Where the standard deduction amount can be increased from Rs 50,000 to Rs 1 lakh.
02:46 Even that is something which is being demanded by the industry.
02:51 Arnab, would it be right to say just back of the envelope calculations those that claim a substantial amount in HRA still benefit from going with the old tax regime.
03:07 And from that perspective for these taxpayers that live on rent should something more be done?
03:14 Definitely if you look at the calculations the moment your deductions which you are already claiming under the old tax regime.
03:23 If they are high then the old tax regime is the attractive option for you.
03:30 And that is the main reason why you find that a lot of people have not yet shifted to the new tax regime.
03:36 So that is definitely a point which is like a hindrance to a large-scale migration.
03:44 Now the question is that whether the government is in a mood to give deductions at all under the new tax regime.
03:52 Because see those who are either paying rent or who have a housing loan deduction.
03:59 All these people are the ones who are most likely to stick to the old tax regime because they are claiming a very high deduction under the old regime.
04:07 But if there are no deductions available at all under the new tax regime.
04:13 Then it's only going to be a question of whether the finance minister is going to broaden the slabs, increase the basic exemption limit and all those factors which will lead to a release.
04:26 Because at the moment if you see an income up to 15 lakhs will give you a tax of 1,50,000 under the new tax regime.
04:34 After which the 30% rate kicks in.
04:37 So there is the large migration will happen this year itself.
04:44 One because of the default regime plus this kind of benefits to the low income people will find it attractive to move to the new regime.
04:52 But the high exemption claiming population will still stick to the old regime and there will have to be something substantial to make them shift.
05:01 Fair point. Is there a significant case to increase those slabs as Arnav was just pointing out Puneet.
05:09 Because they've stayed the same and I'm not talking about the new tax regime here.
05:13 Obviously I'm talking about the old tax regime.
05:15 But we're still talking about 30% on tax above 10 lakh rupees and we've had inflation anywhere between 5 and 6% for a long period of time.
05:23 Which means that people are spending a lot more on expenses and income levels have risen.
05:28 So from that perspective the tax slabs don't reflect that.
05:33 Is there a case to substantially rework the tax slabs?
05:36 Absolutely. I think there is a substantial case to rework the slabs.
05:43 Even the lower slab as well as the upper slab.
05:46 If you look at the old regime you have 2.5 lakhs as the entry level slab and it ends at about 10 lakhs.
05:55 It's 30% for the new tax regime it is 3 lakhs and above 15 lakhs it's 30% tax rate.
06:04 According to me it can be tweaked very easily keeping up with the inflation.
06:10 It could be increased by at least 50,000 if not more.
06:15 At least by 1 lakh the upper slab can go up by 1 lakh the lower slab can go up by 50,000.
06:21 Keeping pace with the inflation and that would really make a meaningful difference for lots of individuals.
06:29 Even the surcharge can be tweaked. Clearly for new tax regime you have a lower surcharge.
06:36 The highest surcharge is 25% while it is 37% for old tax regime.
06:43 Clearly there is a case for tweaking surcharge as well.
06:47 Because surcharge should not become the permanent levy as such.
06:51 It's levied for a particular purpose and if the purpose is served then clearly there is a case to lower surcharge as well.
06:57 Got it. So last thoughts here then Arnab I will toss it to you beyond of course what we have spoken about so far
07:04 which is essentially the crux on the slab based treatment of tax.
07:09 Are there any other tweaks that you think can be possible or should be made in the interim budget?
07:16 Well you just look at it this way that politically this is the right time to make the changes
07:24 because the country is going to vote in the next few months.
07:27 And if a real benefit has to be given then an added incentive in terms of tax breaks for pension investments
07:35 that would be according to me a big gift because it will at least help a lot of people secure their future
07:41 and make it an attractive option for people to put money away for the long term.
07:45 Okay fair point. Arnab as well as Puneet thank you so much for joining in and giving us that perspective.
07:50 Of course a lot of this is a part of wish list that we have had for some time.
07:55 Let's see if the finance minister is listening. Hopefully she is and hopefully she has got a present for you as well.
08:01 You will find the live coverage of course of the budget all day tomorrow.
