Union Budget-2020: The Optional Personal Income Tax Regime In India!

Union Finance Minister Nirmala Sitharaman today presented the Union Budget for 2020-21 in Parliament. A few novelties are seen immediately: the Minister’s budget speech of more than 160 minutes proved to be the longest one in history; for the first time the Budget was presented in three innovative categories—Aspiration India, Economic Development and Caring Society with their divisions and sections; a new scheme of setting up solar pumps for farmers having barren lands thus allowing them to earn even without cultivation; identifying 100 water-stressed districts of the country for action in light of the looming water crisis; and a lucrative income tax regime of lower rates which only turns out to be optional. While economists and corporate stalwarts had been shouting all these months about boosting up the demand factor in view of a slowdown and growing unemployment the Budget didn’t list out specific measures to increase consumption or to provide more employment opportunities apart from continued focus on infrastructure investment, continuing with lower corporate tax rates, special emphasis on rural development & agriculture, abolition of the Dividend Distribution Tax as a relief to companies, the direct tax concessions and a few others. The opposition parties slammed the budget on these grounds with a few economic experts also joining in saying that it is another missed opportunity for Modi 2.0 to check the slowdown. While the details of allocations will give the final picture on this we will here concentrate only on the complexities inherent in the optional personal income tax regime.

People of India, particularly middle-class salary earners, have been expecting some income tax benefits since years. The government also from time to time promised reforms in personal income tax structure and its simplification. Today, people got ecstatic while watching live television where the Finance Minister announced major tax cuts. Unfortunately, they were blissfully unaware of the rider attached to the concessions. It was only after the news channels started elaborating on the issue that they finally seemed to see the real picture.

The proposed income tax rate cuts come in these slabs: for annual income of Rs 5—7.5 Lac it is 10% as against the earlier rate of 20% for income slab of 5—10 Lac; for income of 7.5—10 Lac it is 15%; for income of 10—12.5 it is 20% as against the earlier rate of 30% for any income above 10 Lac; for income slab of 12.5—15 Lac it is 25% and for income above 15 Lac it is same as the earlier rate of 30%. The earlier decision to exempt taxpayers having a total income not exceeding Rs 5 Lac per annum has been retained while for others the new rate is 5% for income of 2.5—5 Lac as earlier. Straightaway, we can arrive at sizable cash benefits for taxpayers at every income level, and this was bound to cheer the salary earners. But then the rider!

The Finance Minister, after announcing the huge benefits accruing from the rate cuts, clarified that to simplify the tax structure she had removed about 70 exemptions associated with income tax, and that the new tax regime means taxpayers would no longer be able to avail of such exemptions. She further said that taxpayers are welcome to choose—they can stay on with the old tax regime or can opt for the new one. This has set in motion a calculation spree among people which may well continue or even intensify in the coming months.

We will take a few examples of exemptions not to be granted in the new tax regime which include deductions under 80C or 80D, Leave Travel Concession (LTC), house rent allowance, entertainment allowance, professional tax amount and so on. Now, for a big family the LTC amount, if they want to avail the facility at least once a year, will be quite high and if the salary earner of the family opts for the new regime this full amount will be taxable, as per the rate applicable depending on his/her total annual income; this holds for other amounts too relating to other abolished exemptions. Similarly salary earner of a family living in a rented house will not be able to file for house rent exemption if s/he opts for the new regime. Therefore, it is bound to involve complex calculations as to which regime will be better under what conditions or lack of conditions.

For the first time in India an option is being offered for different income tax regimes, and the taxpayers at the moment are unable to rejoice at the proposed ‘bonanza’. The Finance Minster asserts that this is only the beginning of direct tax reforms in the country and of a simplified tax structure to be realized in near future.  

The Costliest Travel Concession Ever!

Most of the people in salaried class do get leave travel concession (LTC) annually or every two years. Depending on the employers the package benefits vary. If, by misfortune, you belong to the Government of India you do get LTC, but with repressively dictatorial conditions:

• You have to travel by Air India come what may as if it’s you people that makes the bankrupt airlines viable and competitive. You have to go over their special LTC counters and book your tickets physically with their options for your travel. Even if their pilots are on never ending strike you are not spared. And you have to ignore all cheaper air ticket offers available online.
• If your compulsory airline fails you at the last moment you can book only at the government appointed travel agencies most of which may not have online booking facilities. You can send in an application for booking and it hardly matters if your tickets arrive after your leave period is over.

I had recounted my sufferings earlier where my only crime was to opt for LTC for going to my hometown.

Coming back from my leave I was gratified to find an advance of 45,000 rupees (approx. 50 rupees a US dollar) in my bank balance which you cannot expect to get normally. My local office took account of my sufferings and loss of money due to the Air India strike and sanctioned the actual cost of travel (around 30.000 rupees). But the order had to go to the chief paying authorities in Delhi for final approval and payment.

After two months I was horrified to find 23,250 rupees deducted from my salary of August, 2011. On inquiry I got the Delhi letter that said under the booking restrictions I was not eligible for LTC and since the advance was given to me two months before a penalty of 1500 rupees also added making the total 46,500 rupees. It was to be deducted in two months in two EMIs. So I lost the same amount in September salary too.

But it was hardly over. The cuts continued in October too making the total cost of trying to avail LTC a staggering 69,750 rupees and counting! My Diwali darkened!

Maybe I am set to be punished for my crime for lifetime. So I am set to be the first Government of India officer ever to turn beggar while in service and to run to the streets for shelter!

LTC is a frightening word if you are in……..!

Air India: My Story

We were scheduled to leave for our hometown Guwahati on 4^th May, 2011. It was my homecoming after more than year and of course some events and programs of Ragini fixed earlier. As I had very limited leave and events were fixed we could not afford to either cancel of postpone our trip. We booked or rather had to book with Air India (AI) long back because I , curse my decision, took the leave travel concession (LTC) offered by the Government of India every two years. With 8 days left for the journey the AI strike of greedy pilots began, but I never thought it would go on till then.

When the strike seemed to be endless I got a little tense because if it continued and our flight got cancelled in the last minute I would not be able to book due to LTC compulsions and exorbitant private airlines prices. So I started taking advice from knowing people, sought permission to no avail and finally on 2^nd May decided to book refundable tickets on private airlines for safety. Meantime I kept on inquiring AI helpline and every time I was assured that our particular flight was running normally.

On 3^rd May I again rang up AI helpline and the executive told me, ‘Don’t worry! Your flight is on!’ Even then I persisted asking if  it was hundred percent confirmed. The executive assured me again and even told me the terminal for departure. I believed them, curse my decision once more, and cancelled my private tickets paying a hefty cancellation fee per passenger. Then around midnight when we were ready packing up and about to go for a short nap before catching the flight at 6.10am I got a call from AI. The lady executive calling from a number somewhere in the north region informed me that our flight was cancelled apologizing and assuring full refund without charges!

I rang up AI helpline and shouted at them for misinforming me all the way. The executive on duty at that time told me that they get updates for flights continuously and admitted that the I should’ve been informed about that. Now I knew that every employee in AI is his/her own boss and they are bestowed with absolute power to tell passengers whatever they felt like. The AI website is also devoid of any useful information. So passengers are harassed as a rule, made to pay through their nose and I was subjected to the same treatment as I was hopelessly left alone to rebook my journey with avoidable expenditures increasing all the time.

A note about the booking syndrome too. Forced by LTC rules we had to go physically to the AI counter at Nariman Point where the domestic reservation counter looked worse than a railway one and the atmosphere was palpably unfriendly and frightening. Half of the booking counters were empty and it took hours for our token finally get a call. The domineering lady Booker took the basic details from me, went on tick-tucking on her computer and did not even bother to inform me which flight we were booked into—forget giving my choice and options.

I was horrified to witness that for one journey-Mumbai to Guwahati- and two passengers, four separate tickets were made! Per passenger and for Mumbai to Kolkata and Kolkata to Guwahati segments. In all my flight booking history I always got one ticket for one journey irrespective of number of passengers! Combined with my return journey I had a complete ticket file of 8 pages with an assortment of PNRs, ticket numbers and amounts! While canceling all these on wee hours of 4^th May the harrowed helpline executive having to cancel each ticket separately and charging refund fee for each ticket separately expressed his opinion all the while,’ There shouldn’t have been so many tickets!’ Maybe more money is generated misusing the LTC rules finally giving an inflated bill to the government.

LTC must be delinked from Air India immediately so that hapless government employees could travel in comfort. For me personally, I have decided to avoid AI for the rest of my life even if it means foregoing my LTC entitlements. Isn’t this corruption too making wasteful expenditures to avail of a particular facility?

Air India should no longer be patronized by the Government of India. It should be left on its own either to survive or perish forever. Only professionalism must be respected and no emotions or sentiments or patriotic feelings must be associated with this degenerated giant.