A too-long budget speech that was abruptly cut short, budget proposals that disappointed markets and income tax paying Indians. A fatigue with more good intentions rather than a big push for real change. That’s the story of Budget 2020.
The 35 million Indians who bear the disproportionate burden on income tax in India were waiting to get something from this budget. The dual tax system announced by the FM looks at a lower tax regime for those who are willing to give up on the deductions and exemptions. People with incomes up to ₹15 lakh a year benefit if they give up on their tax breaks and pay a lower rate. The FM said that they will gain up to ₹78,000 a year. Though if you add the common deductions, this number changes to the negative. It gets worse for those with incomes over ₹15 lakh if they move to the new tax regime. According to the FM, the state is letting go of about ₹40,000 crore of revenue due to this—or this is the money in the hands of the people if everybody migrates to the new system. But it does not seem that everybody will move since the benefits are not clear at all. It does look like the government has not thought this proposal through and not counted all the deductions that an average household avails. Start adding the others and the move to the new tax regime is not recommended because it leaves you worse off.