KPMG executive on tax provisions in the new budget
As people take stock of the new tax structure laid down in the latest Union Budget, KPMG India’s Partner & Head for Global Mobility Services – Tax Parizad Sirwalla has recommended that individuals take stock of their individual financial situation before selecting the tax regime that best suits them.
The Union Budget 2020 has presented an optional alternative tax regime, allowing people to pay income tax at a lower rate in exchange for forfeiting tax deductions and exemptions such as the House Rental Allowance or the leave Travel Allowance. Interests on housing loans have also been deductible in the original tax regime.
According to Parizad Sirwalla from KPMG, the new tax regime might be beneficial to a number of taxpayers, in light of the fact that the existing deductions are not widely in use. The government reports that nearly 80% of Indian taxpayers barely use tax deductions and allowances, making the existing tax structure largely redundant for these groups.
However, tax regimes are scarcely ‘one size fits all’. Sirwalla spoke to The Hindu Business Line on the various features and implications of the new taxation regime. She advocates a nuanced approach to selecting taxation policies.
“There is no concrete answer on whether a taxpayer should opt for the new scheme or stick to the old scheme. A taxpayer should do his/her own customised mathematical calculations to see if he/she is better off under the new tax regime. For instance, if the taxpayer is claiming all the possible exemptions and deductions, he/she may be better off sticking to the old scheme.”
“On the other hand, if a salaried employee is taking the benefit of standard deduction alone, he/she may have lower tax incidence in the new scheme,” said Sirwalla.
The new budget also sought to take hold of the steady stream of revenue being lost to foreign economies via a large non-resident Indian (NRI) population. The remedy for this has been to restrict the definition of NRI and bring a larger share of the diaspora within the taxpayer bracket.
A number of financial experts have allayed misplaced concerns around these new restrictions, and Sirwalla has chimed in as well, arguing that it has been “clarified that there is no intention of taxing Indian citizens who are bona fide workers in other countries including those in the Middle East, and that foreign income will be taxable in India only if such income is derived from a business/profession in India.”
The various tax measures are all aimed at creating a “flatter” tax landscape in India. Another major talking point from the budget, which serves the same end, is the new corporate tax regime that has taken significant pressure off businesses in the country, particularly in the manufacturing sector.
