Personal Income Tax: Decoding The New Tax Regime | Budget 2023 | Business News | CNBC-TV18

thank you very much for joining us on this live chat it's a free building conversation and the idea is to make it very very simple so you understand how budget 2023 impacts your money your finances your take-home salary and more and we've got a full house we have tax exports to help us make sense of this old regime new regime default regime and of course joins in to give us the wealth perspective and how does how does my investment planning change and of course we have two ladies in the house parizad sirwala from KPMG and surabhi marwa from ey India to help us make sense of all the tax announcements that we have heard so thank you so much thanks to all of you for you know staying back through the evening to take the questions and they've been coming in thick and fast I have to you know get the big elephant out of the room I think the the one question that's been flooding all our timelines today is should I move to the new regime or should I stay in the old so I'll I'll start off with the ladies on the tax front personal income tax uh surabi why don't you take that one first sure so uh sir B and what a lovely name you have you too so it's very specific to a person's exemptions and deductions but in all the maths that we did and I think parizad would agree what we've seen is that if your deductions and exemptions are about 4 lakh 25 000 and more if you earn more than 15 lakh rupees then the old regime may still be beneficial to you because remember in the new regime you are only getting the standard deduction you're still not getting ATC ATD the medical ppfs Etc uh of course above five crores because of the reduced rate of surcharge and the maximum rate becoming 39 as against 42.7 the new regime may still be beneficial so in a nutshell while you can look at your income at different brackets 7 lakhs 10 lakhs 20 lakhs what we've seen is if your deductions like HRA plus exemptions like the 150 under 86 Etc are about 4 lakh 25 or more then the older regime may be beneficial and if they are lesser than that then as you progress the newer the new regime will be more beneficial and and this is this is for someone earning 15 lakhs taxable income of 15 like that's that's when the math kicks in right and the math kicks in because of the various rates the reductions and the you know the rebate they've given 87 a rebate which was five lakhs early and now seven lakhs but that's really what the major math is coming out to say everyone needs to go back and check their exemptions yeah yeah so viewers just to sort of simplify before we take it to parisad what we're doing is we're taking an example uh assuming that your taxable income today is 15 lakhs remember in the old regime the 30 tax kicks in immediately after 10 lakhs now here it kicks in after 15 lakhs so we are taking 15 lakhs as a as an example as an illustration here so uh you know what's your number coming to uh how much deduction should I be enjoying for me to remain in the old regime when it will still make sense let me say to remain in the old regime so I completely Echo what should we just articulated because it actually for every individual there are a couple of variables that you need to see you have to assess your own individual position it's a function of your income also it's a function of what deductions you are used to cleaning uh so if I just sort of and so we mentioned folak 25 which includes the standard deduction of fifty thousand considering that the standard deduction of 50 000 is now neutralized because you now have it in the new in both regions yeah no scheme if I might so it's it's a little confusing at first brush you know old regime existing new regime and now a proposed amended Urology if I just put it the other way and I neutralize the standard reduction and you know as we said the other popular let's assume HRA interests on housing loan and various other deductions that you're used to claiming my workings you know Rough and Ready if you're taxable income is in the range of 8 to 15 lakhs if you are in that category and your deductions excluding standard deduction of 50 000 is to the tune of around 1 lakh 87 500 to 3.75 lakhs or more than the old regime is still beneficial to you if you're in that bracket of income with this kind of reductions or more okay if you're 18 lakhs to the 5 crore bracket of income then as should be said you know there is a Max I've just sort of removed the standard deduction out of the equation so it's rupees example it was 4.25 so that's correct into 3.75 excluding standard reduction in that income bracket if more than that then again your old regime is beneficial but if you're really a high net worth individual and you're above five rows of income as an example then by virtue of the surcharge dropping from 37 to 25 percent definitely the new regime is better for so the Supreme High income earners let's say foreign Nationals working in India who do not Avail deductions clearly it's very clear for them maybe the new the proposed amended new regime is definitely better but for existing taxpayers as is already articulated it's a function of your income bracket along with the function of the reductions that you are claiming because what is really taken out of the equation from a reduction perspective in this budget which is announced today is standard deduction that is one important change and the other is you know as you mentioned that uh the surcharge rate has dropped uh you know for income earners about five so you know things are important to be considered I think uh thank you both these are some great references to have some ballpark calculations so people can start thinking along these lines and for the benefit of whoever's tuning in I'll just repeat this is the most important Takeaway on personal income taxes mentioned if you are in the 8 to 15 lakh income bracket taxable income then look at all your deductions forget standard deduction because that's common across both the regime look at the other deductions that you're getting under ATC ATD or HRA if the deductions are up to 3.775 1.87 to 3.75 above 3.75 it will

start making sense uh in terms of staying in the old regime if it is uh less than that if you don't if you're not earning so many deductions then you may want to switch to the new regime parism I just want to clarify uh ATC we know straight away one and a half lakhs mediclaim is simple to sort of tabulate for the the purpose of this illustration how much HRA have you sort of Taken on board just so that we know that people paying rent of you know roughly this amount uh should should keep that in mind roughly around that much okay okay great I think that that really puts us you know in a good space where we can start thinking about uh totaling up all of our deductions and exemptions uh now that we understand this the question is will there really be more money left in the hands of people that was the big ask in the budget right more money to either spend or maybe even to invest what's your takeaway see I feel uh from a personal tax and savings and investment perspective this is a landmark budget there's this great saying that you know a good footballer is where the ball is but a great footballer is where the ball will be and when you look at this budget it's a clear signal that the new regime is the default regime going forward so it signals to the country and especially to the young of the country who will pay tax for a long time from here on from a regime of tax rebates you should prepare for a regime of tax payment so instead of clamoring for increasing ATC limit every year increasing 80d limit be prepared to you know yeah I'm sticking my neck out on this one and saying that in the next four or five years you will see more development on the new regime than on the old regime okay right it will become simplified and you you pay your tax and you go home when you pay your tax of course I mean I think one big thing that has happened is the reduction of surcharge for the high net worth that will leave a lot of money on the table now when you have money on the table the government will want you to spend it because that is the boost for consumption you know somewhere I I feel the I don't know is this really fair the high earners the the super rich for them the math is so simple you just have to shift it's right away the surcharge reduction is you know freeing up a lot of money if you're moving to the new region I still have to calculate going by so Ruby and Paris sort of basic blueprint but here also they've made it simple now if you have seven lakhs then you also get something for somebody said that the middle class gets TV debates so but I think in the next three four years this is what will happen and that's where what you do with the Surplus becomes investment becomes very important and that's how you prudently if you start prudently looking at money and this thing that started post demonetization of shifting from fixed assets to financial assets which got cemented in in postcode and now we'll go a step further post this budget is my view okay a quick take from the ladies before we move to the next theme do you think that this makes it uh lucrative enough to switch I mean the the old regime the concessional tax regime when it was introduced was almost a non-starter parizat is it looking better now I think the intention the stated intent of the government was very clear I mean even two years back when it was announced it was very clear that you like the corporate tax regime uh the thrust is to move to an absolute flat uh individual tax structure with lower tax rates more slabs and uh you know uh absolutely deduction free or exemption fee mechanism so keeping that intent in mind uh of course the earlier uh the new regime in the earlier of that was not having takers and we had statistics that hardly fire luck people's uh availed it over the last two years so uh to keep take that agenda ahead definitely the changes are in the right direction and it is looking more attractive from that perspective okay quick point you can go if I absolutely and if I look at it from the you know youth was one of the seven key drivers yeah he thinks that the FM spoke about as a young person who's in the coming into the fold of income tax X my attitude is still seven lakhs I'm getting a rebate so no tax to be paid if I add standard deduction and I'm salary no tax till seven and a half and then I get into the fold then and later on I pay tax with a smile and it's lesser uh you know lesser burden some administratively as well so I think that is a very very good mechanism to start getting people into the fold and making it simpler as well when you put it that way actually it's it's really striking right so you know a new person getting into the the work atmosphere new earner seven lakh rupees no tax do you think it's the YOLO concept and you spend it away or do you think it will come back to mutual funds no it will depend on people like you on how you communicate with them and I do believe you all play a very influential plot in that and this is the starting of investing in its truest form in India and then if I at that age would have invested 500 rupees per month I would be financially free today there was nobody telling me that that's not an excuse to say but that's the truth but today there are enough people educating them and if they just just put aside a little part of their salary maybe 20 to start with and India is getting expensive as a country so the retirement is a serious issue in India yeah if they can start a little bit of adding Financial Prudence because the country is moving towards Financial Prudence into their sort of income a lot can happen to them and they have to be cognizant of this from here on is what this budget is saying very clearly and loudly yeah I mean that's a painful point right I wish I had started earlier a lot of people have that thought including me I mean let me put it out there on National Television but let's okay quickly move on lots of other aspects of this budget that we need to cover the the other development that kind of came into light was insurance and that's probably the biggest debate when you're talking Personal Finance in budget 2023 so to quickly explain this to you in a simple fashion what the budget is doing is that for insurance policies non-u-lip and non-term insurance policies that you will buy after the first of April 2023 if the total premium or the aggregate premium crosses five lakh rupees then there is going to be a tax incidence the money that you are making on these insurance policies what the insurer is going to pay to you uh will be taxable which wasn't the case till now but once again ladies we need more clarity on this because there's a lot of confusion in the day whether it is across multiple policies policies from one single insurer single policy uh so so we want to take this up first in terms of clarity I think we're uh it's not very I mean the bill and the memorandum speak about this but we'll have to analyze in more detail but what the key points are ulip is not covered because the eulip was covered in 2021 uh death benefit is not covered so what is important is it should be a single policy premium above five lakh rupees policy taken after first of April 2023 and no and if it's not a death benefit then it should be taxable I don't think it's across multiple policies I think it's qua each policy As you move along um and basically to track uh things like money back policies Etc that's what the fine print seems to suggest okay your interpretation I think I was slightly different view when I asked what we said you know it's open for debate because even when this unit thing was introduced uh you know from from frame to an E1 there was a circular I think number two which was also introduced thereafter clarifying and there were various various permutations and calculations and the computation mechanism really becomes tough uh to interpret with the way I have read it so far and it's a very Rough and Ready read or you know I really feel it's the aggregate premium for one or more policy which exceeds five lakhs and not really qua policy you know and because they've said then it's payout on maturity is proposed to be taxed as income from other sources uh so if you you know so I really feel it's the aggregate of the premiums and not to our policy but yes I know it's you know or open for interpretation of course I do need to read the fine print uh carefully but that's the prima facie and emerge and uh you know while the computation mechanism is to be specified so we said so that is continues to be exempt and uh this impacts now all the other life insurance policies particularly what I can think of at the endowment and the cashback policies if I also read to speech again the stated intent is that you know you cannot benefit from insurance particularly high value insurance and so if you have uh you know endowment policies which are really high on premium uh then you will really have to factor in the tax aspects uh going forward yes because it's possible yeah no I think that's that's really important to put it out there the bottom line is if you're watching this this telecast if you're watching this live on social media uh and you you happen to walk into your neighborhood bank tomorrow and someone sells you a new insurance non-u-lip insurance product non-term Insurance product hold on you need tax Clarity before you decide to buy it or not ignore your taxes and then of course uh you know it's it's an individual's choice but wait for the clarity to emerge whether this is going to be applicable said to uh one single policy multiple policies put together at what point will the income from these policies get taxed so we need some more granular detail but is that you're making a point yeah sorry I was just saying that you know the fine print has to be red red bear on the computation mechanism because even for the u-lip when the circulars came it really became very complicated so surabi yeah I think what's also going to be important is you know like uh not one policy but one insurer as well so I think I'd say just watch this space because once we read and once the computation mechanism comes out it could be very different because that's what happened in ulip also third policy second policy but that's the end the moral of the story is now they're going to be taxable in what form and manner uh we will you know we have to wait yeah because even the insurers at least today there were so many different versions and interpretations going around so I think everybody including the industry itself needs more clarity and hopefully we will have that from North Block in the days to come but so Roop as surabi said the bottom line is non-ulip non-term insurance is from a tax point of view is not being incentivized anymore good news for mutual funds no there you missing out the fact that when when it's moved from five to seven lakhs we're missing a fair amount of people who could have come to us on the LSS side also so so it's both sides you know I personally believe and it's a personal so I'm not qualified and nor should I be speaking on insurance but people should buy insurance for insurance yeah and they should buy investment products from an investment manager so that sort of clarity starts coming in is also a fact see I understand that because I'm not a genius I believe in keeping things very simple so protection is protection investment and wealth creation is is that but you know who's to say everybody has their own individual choices have you ever you know flourishing industry that offers you uh you know both put together so it's it's individual Freedom uh and choice so we would also look at first-time investors to come in because everybody wants instant gratification we would look at the elss as the first choice if you invest in this you're getting a tax break now for those newcomers that that's a big segment which will go away from us is also a reality exactly I was just coming to that so the fact that 18 is still not available if it ever will be available we don't know in the new tax regime uh how much of a hit is that going to be I mean sort of is there any any talk what's the talk you're hearing with the New York State too early because we'll have to see how many people actually the bulk of the people who invest in ATC are still left behind there is enough for them to be in the whole regime so we'll have to wait and I would suspect and I'm backing myself on this one which is not good in the next two three years we will see some impact coming in because I suspect there will be more modification out of this regime in the out of this space of tax breaks in the old regime than than it was in the past okay two more quick points and then we'll start summing it all up uh foreign remittances under lrs the liberalized remittance scheme which basically allows you to remit up 250 000 US Dollars overseas now the tax element on this scheme has gone up so surubi you want to take it away and explain this to us is it going to become a big pinch what happens to people who who need to remit money overseas let's say to their children uh you know or some other sort of family emergencies Etc so earlier the rule in the last year is when it was introduced was that if you are remitting lrs of more than seven lakh rupees there was a TCS of five percent now this was TCS you could adjust it against other tax when you are filing your return now when you're sending money the rate has gone up from five to twenty percent and the limit of 7 lakh rupees no longer replies it doesn't apply on overseas store packages and money that you send for uh you know normally outside under lrs and a lot of rules had changed and in August 22 as well a money that you send for medical Etc is still subject to the old rules so there are certain everything hasn't changed the five percent still applies to Medical Etc but if you're sending money for like like I said OC store packages or otherwise for say Investments overseas under permissible limit then it's 20 and this 7 lakh limit doesn't apply and I think the reason is that in the last two years the government has been very very actively tracking lrs very actively seeing what the money can do and in the new ODI regulations that came in in August last year again they said there were certain guidelines around what you can do with this lrs money and when you need to bring it back into India so I think it's basically to monitor how much money is going out and what's being done with the money and that's really what this change is all about okay and in terms of just just to end you know if even though this is a TCA a 20 it's a TCS it's a cash flow issue you can take a credit when you're filing your return so it's not really a loss of money but it will definitely have a cash flow impact okay got that so that's on remittances uh let's also cover housing quickly not too much actually nothing changes a lot of expectation on home loans nothing really happened but uh there is one change parizad uh which is capital gains that arise from the sale of property so you can you just quickly run us through the the new norms right so actually it depends it can be quite a big change from a real estate uh transaction perspective uh so there are currently two sections for long-term capital gains which are popularly called as rollover tax relief and when you're selling basically a house and investing in a house so that's section 54 or when you're selling any other long-term capital asset and investing in a another house both these are for long term availing relief under long-term capital gains so under the first section 54 Where you sell a house and invest in a house you have to invest the capital gains and under the second section 54 F where you're selling any other Capital asset investing in a house you're supposed to invest the net sales proceeds under both these Provisions under the existing provisions of the law there was really no cap or ceiling on the amount of uh on the cost of the new property so you could purchase and you know any luxurious apartment or any value of the property now what they have said and of course there were conditions you know for the time period of purchasing the house before the sale happens or after the sale depending on whether you were purchasing it outright or under construction now for both these sections there is a cap of 10 crore for the new property so beyond that so in uh you know if you're uh if depending on the amount of your capital gains while 10 crore as such looks like a big amount for the cost of the new property but depending again on what income bracket and what situation you are in the point is that there is a 10 crore limit so in transaction of sale of shares sometimes you know when there are huge value transactions happening under 54 F if you were to invest in a property you were getting the exemption if you invest the net sales proceeds without any embargo on the cost of the new house and you even asset it into the capital gains accounts key the point being that you know now the cap is for 10 crores for the cost of this so if you're making capital gains in excess of 10 crores whether that is from property or whether that's from shares the only the maximum amount that you can basically save by parking it in a real estate investment is 10 crores is would that be a simple reading puzzle yes okay ready yes yeah okay got that got that so but as you're saying perhaps it's something that obviously the high income earners they have to think about a little more carefully and then plan things accordingly so that pretty much kind of you know takes us through all the major uh takeaways of the announcements let's get down to some final thoughts and final advice really as people go around you know go about figuring out what they need to do with their uh income tax regime their Investments Etc uh so I hope so what would you say to people who are who are tuning in right now who are listening right now what should they be doing let's say in the next two to three weeks so I think the first realization is slowly but surely the onus of managing your money is Shifting back to you take cognizance of that from a capital Market perspective there are a lot of positives from this budget I mean we do see this as as definitely a more uh fiscally prudent budget and it will lead to easing of interest rates in the near future I mean that's our view and our house view earlier was in an interest Rising regiment there is no way Equity can be re-rated we probably towards the end of the year we could see that as a trigger for Equity rewriting happening so and and add to the basic fact that this country is going from 3 trillion to 6 trillion whatever people might say so the only way this can come back to investors is through the capital markets and then if you're not invested typically I always say that there is a risk to investing there is a risk to not investing the risk to not investing post this budget is significantly growing higher and higher okay but you have to be very prudent about your money you have been given two options you can spend it or you can go about investing in yourself or your retirement India will get expensive no doubt or debate we in Mumbai know how expensive India can get so prepare for the future and and look at money very prudently from here on is my only only submission some some would argue it is the equity Market seems to be giving several entry points over the last couple of weeks but that's a debate for a different day a different platform ladies quickly last Thoughts with you as as well but is that the what's your takeaway and what's your advice more importantly to people on the tax front and the personal finance front now yeah so I can only talk on taxes that's me uh I would agree to the point that you know swarup mentioned in the beginning of the conversation that I think you know by default now is the new tax regime so the more oriented we get towards that gradually it's a while for this year nothing changes but as we progress towards the next financial years uh so you know it was very clearly laid out in the speech as well that the new regime is going to be by default so if I look at it from a salary taxpayers perspective generally what we are used to is telling our employers at the beginning of the year that you know right now just take the Declaration of the old tax regime at the time of my return it was always had the option of changing it if I am a salary taxpayer I look at the new regime to see if it was more beneficial I think we need to orient ourselves you know to say that look looks like the new regime is here to stay and if I uh you know so I need to just sort of get into that mindset and like like uh like anything you know debt and taxes are certainly that absolutely I think you said it that line always sums it up right yes it always sums it up and I think you know you know because even for higher income earners retires have been taxed over the last couple of years insurances now you know so you know it's best to sort of we're looking at slabs which are now being tweaked with lower tax rates but devoid of exemptions all right well out of time on this live thank you very much to all of you for joining in and helping us simplify demystify all the tax changes that have been announced today thank you viewers for joining us as well foreign

2023-02-04 03:41

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