NEW TAX REGIME AND INVESTMENTS

This EET system is very harsh on individuals, especially the middle income groups and salaried class who have to fall back on their own investement for their surival in old age. The exceptions may be the Govt/Bank employess who get some kind of pension.

There are two points to be noted here :-
1) While an assessee may get benefit of 10% Tax exemption on investments, the tax paid on withdrawal may be much higher as the total amount withdrawn could be much higher and thereby the assessee willcome under a higher slab of IT.
2) The Govt could increase the Tax rates or simply change the tax slabs, which could again mean that withdrawls could be taxed higher.

Hence, it is probably better to pay tax on income rather than to invest for tax savings. If people stop or reduce savings, it will be the Govt that will be hurt more. Even the Industry will be hurt by reduction of ELSS investments.

One can only wish that wiser counsel prevails and the Govt will make changes to the DTC to retain EEE.

Lastly, for the Govt money is not a problem. There is sufficient money available for development programmes. What is needed is proper usage of allocations and stoppage of all kinds of pilferage and corruption.

DISAGREEMENT WITH THE ABOVE


1) Yes argument abt the tax bracket in investment year being low and being high on withdrawal as the amount is higher is right.
2) Tax rates will not go up from current rates.. they are only going to come down as income levesl go up and commpliance increases.
3) ELSS (Mutual fund and such schemes) will not be affected as they are any way not tax free on withdrawal.(capital gains tax rules will apply) under which long term investment sell does not attract tax in some cases.)

Rules will apply only to ppf, life insurance, pf