As the ending of this fiscal year approaches, Indian citizens eagerly await the Union Budget hoping for announcements and reforms that will help decrease their tax liability while maximizing their savings at the same time. With Finance Minister Nirmala Sitharaman having announced the budget for 2020 early in the year, what is in store for taxpayers in India as this decade comes to a close?
Here is your ultimate tax guide for 2020.
The 2020 tax regime – What’s in store?
On 1st February 2020, Indian taxpayers got a pleasant surprise when it was announced that they could opt for a new, optional taxation system for the taxable year of 2020-2021. Dubbed by many as the ‘Concessional Tax Regime’, this new system now co-exists along with the prevailing one, and taxpayers are free to choose whichever system is more beneficial to their specific scenario. You can exercise your choice and pick whichever tax system is more beneficial for you each year.
Essentially, the new taxation system differs from the older one in two key areas:
The new system offers reduced tax rates.
Nearly 70% of the existing 100 tax exemptions, deductions and rebates have been removed under the new system. For instance, if you opt for the new tax system, you will be unable to receive any deductions under section 80C of the Income Tax Act, 1961.
Tax Guide 2020 – Which tax regime is better for you?
From the outset, it would seem to many that the new tax regime can help taxpayers increase their liquidity and have more disposable income at hand, besides providing them with more flexibility in investment choices.
If you opt for the new system, you will not have to rush and make unnecessary investments at the last minute just to save up on taxes as most deductions have been scrapped anyway. Of course, the new system also offers better tax rates and is more simplified than the older one.
On the other hand, people who opt for the old tax regime can avail of several tax exceptions on capital assets such as mutual funds, equities, insurance policies, and even loans.
Ultimately, it would be advisable to do a proper evaluation of your tax liabilities and ascertain which tax system will be better top your specific situation. As a thumb rule, if you have numerous investments that let you receive considerable tax exemptions, the old regime could be the better choice for you.
Tax savings with YES BANK’s Equity-linked Savings Scheme (ELSS)
YES BANK’s Equity-linked Savings Scheme (ELSS) can be a great way for you to avail a tax exemption of up to ₹1.5 lakh under Section 80(C) of the Income Tax Act, 1961.
As compared to other fixed-income tax-saving investments, ELSS funds can help generate higher returns for you in the long-term as they invest a majority of their portfolio in equity. Moreover, YES BANK’s ELSS funds also offer you a high amount of flexibility, allowing you to diversify your investments. To put the icing on the cake, any tax guide will inform you that these wonderful tools for tax-saving do not have any maturity date either.
Ultimately, as evident in this tax guide, 2020 offers you two choices when it comes to being a responsible, tax-paying citizen of the country and you opt for the one that suits your needs the best. However, irrespective of which tax regime you choose, do remember that YES BANK’s Equity-linked Savings Scheme (ELSS) can help you save your hard-earned money in more ways than one.
You can also check out YES BANK’s YES Tax Solutions for more tax and investments related videos, articles and guides.