Over time, the Indian Tax system has seen many reforms. Any changes regarding the tax structure impact the financial situation of taxpayers considerably. It affects their tax saving investments for the future.
Budget 2020 introduced specific changes to the overall Indian Tax system and the relevance of various tax saving instrument. These changes are introduced, keeping in mind the current social and economic situation of the country. It is also done to meet the national goals of development. As a taxpayer, you must familiarize yourself with the changes in the tax system. It helps in understanding the personal financial condition as well as analyze the measures for the future. It also allows taxpayers to review and include tax saving instrumentin their portfolio, aligning with the new regulations.
Let’s take a look at some of the noteworthy changes in the Indian tax system,according to The Finance Bill, 2020:
- Revised Tax Slabs
Every Indian taxpayer pays their due tax according to their tax slab. It is a system devised to maintain a fair rate of taxation among all economic classes of society. According to the tax slab that an individual belongs to, they plan on the best-suitedtax saving instrumentpossible for them. It is a carefully designed financial structure for the benefit of the individual and their family. Thesetaxsaving investmentshelp in the creation of wealth and save hard-earned money.
The tax slabs of the Indian tax system were revised this year. The new tax slabs allow the taxpayers an option to follow the existing slabs or the revised one. Though there are conditions associated with the switch from the old to the new tax regime, taxpayers must exercise their option of choosing the new regime on or before the due date of filing income tax return for AY 2021-22. In case of a business income, the taxpayer can withdraw their choice only once and following that, they cannot opt for it again.
- Aadhar-Based Verification
The Indian tax system has decided to implement the Aadhar Card as a document for verifying taxpayers. The 12 digit number issued by the Unique Identification Authority of India can be used to detect attempts of fraud with the taxation system. The Finance Minister of India introduced this to emphasize the importance of Aadhar Card after last year’s announcement of its linking with the PAN Card. The Aadhar-based verification of taxpayers was formally introduced in Budget 2020 after the Supreme Court of India declared it as a valid document in its verdict.
- Increased FPI Limit
Another change in the Indian tax system was the hike in the investment limit of Foreign Portfolio Investors (FPI). The revised system proposes to increase the FPI limit in corporate bonds from 9% to 15%. The Finance Bill of 2020 has made specific government securities open for foreign investors.
- Life Insurance Benefits
According to the newly introduced revisions in the Indian tax system, the taxpayers have an option available to them. The new direct tax structure has reduced the overall tax rates for individuals on the condition of removal of previously provided deductions. These deductions include life insurance, health insurance and other such taxsaving investmentsmade by an individual to save money.
These revisions aim to keep the welfare of Indian citizens as well as the economy in balance. For a taxpayer, it brings a chance to evaluate the utility of their financial investments. It may serve as an opportunity to revise their taxsaving instrument.
When considering the best tax saving instrument for yourself, the value of life insurance policies remains undeniable. Regardless of the tax reforms, life insurance policies from reputable insurers such as Max Life Insurance remaina vital financial decision in an individual’s life.
As a taxpayer, you have the option to avail of an adequate cover as well as reap the tax-saving benefits. These plans offered by them are customizable according to the distinctive financial needs of every individual. In light of the new changes in the Indian Tax system, you must understand the various aspects of the applicable Tax Deducted at source and income tax deductions as per the new budget.
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