[//HB]

It would be DISASTROUS for them to allow this nonsensical option to allow a lower PF contribution. We do not have any kind of social security net at all. Youngsters (as rightly pointed out in above conversation) may well opt to reduce the contribution in favor of getting a higher in-hand pay, without realizing the long-term consequences on their financial well-being. If the Govt. does this, it will be a downright disservice to the salaried class, many of whom may not understand that Govt. if fooling them into a false sense of having more cash in hand, when in fact it amounts to robbing the persons future to give him a bit of cash in the present. They ought to outright reduce or abolish personal income tax, at least up to a decent level of income (if not across the board). period.

[opendro]

Do note that some companies keep the basic component of the compensation so low that the PF which is 12% is hardly anything, say, just about 4% of their total monthly salary before deductions. Even if they do away with PF altogether, the actual increase in take home after deducting tax will be hardly 3%, i.e. an increase of Rs. 300 per 10,000 of the current salary. That is hardly anything.

Also, contrary to what some suggested, it is not wise to leave the option to save or not to individuals completely, because it is not wise to assume that everybody will make a prudent financial decisions. A country with people in crisis, be it personal or collective, is bad. Not just in finance. Most mandatory or prohibitive laws are always made if it benefits the larger interest of the country.

[digitalnirvana]

Originally Posted by shankar.balan

About time they gave some relief to the salaried classes and honest tax paying Indians.
We pay Income taxes. And then we also pay GST and other levies on whatever we eat, buy, wear and use etc.
...
Instead of this, they should simply abolish income tax and make an uniform rate of GST on every single good and service - this way ANYONE who consumes these goods and services cannot get away from paying tax!

What really also desperately needs to be done is to levy hard taxes on all agriculture, plantations and the land owning classes, all of whom, while being actually very well off, tend to hide behind the “agriculturist” tag and thus evade taxes - note that I said evade and not avoid. I mean that, because all those self same “agriculturists” are the very ones driving about in their fancy expensive cars and things, but who aren’t paying tax.

...

Thank you thank you thank you for speaking sense.
We should either have direct taxation (income tax) or indirect taxation (GST) for the salaried class, not butcher them at both ends.

In fact, I'd go so much to suggest a flat 3% or so income tax (above a certain threshold income which is say 5 lakhs) across the board for all professions - salaried, self employed, agriculturist and what not.

Do away with the progressive tax slabs and cast the net as wide as possible. And then make tax evasion penalties really really stringent. A country cannot and should not have 2.x% tax payers.

Off topic about the issue with agriculturists - during the days of demonetisation I heard second hand accounts of "agriculturists" in NCR buying Fortuners in cash. Someone I know of (the same office colleague who told me about the car thingy, and whose family has a real estate business in the said region) even told me about people buying flats in cash and apparently the going rate for conversion from "black" to "white" was 60% or thereabouts.
I'm not trying to say all or most farmers are rich and living a life of luxury. Most farmers can barely make ends meet. But real estate moguls / land owners (some of whom feature in the Delhi super cars thread) or say a certain ex chief minister of a south Indian state (with declared assets of a few thousand crores) are not "agriculturists". If they can call themselves farmers, I ought to plant a potted plant in our balcony and call myself one too!

[sen2009]

Slightly off topic but largely relevant -

Banks are arguing against lowering interest rates on deposits, as that may cause shift the deposit base to small savings schemes. In light of this, govt may consider lowering interest rates on EPF. Better taxation on the small savings also work in favor of their argument.


https://www.financialexpress.com/opi...erest/1599085/

There is no doubt that the lending rates must reduce to address current credit slowdown. The lending rates are too high in India. However, to reduce lending rates, deposit rates must be reduced as well.

To that effect, lowering PF interest along with lowering contribution percentage may encourage some increase in discretionary expenses.

I agree with the arguments made by many on the long term downside of lowering PF contribution.

On the other hand, it is a common practice to keep the basic salary to the lowest level possible to reduce employer's contribution load. Employee has the option of contributing more towards PF, but this option is rarely taken.

Moreover, the current young generation with their rent-not-buy philosophy are breaking away in droves from the traditional savings and asset creation mentality. More money in their hands may help boost the economy somewhat.

The key is to balance - both for the government and the people.

[akshye]

I look at it slightly differently. Today, it's not a case that people don't have money. What's missing is confidence in economy. This government, on the basis of clear mandate, is acting at it's own whim and we are all bound by it. In any system, there is a reaction time - a lag, that it takes to output on changing inputs or operators. Based on kind of system, the reaction time varies. Considering macro-economy, this reaction time of system is huge (there is a reason why budget is planned only once in a year). Current government is not waiting to observe the effects of its last change and is varying more parameters at will. Ultimately it's resulting into chaos. In this situation, if you give people more money, they're gonna save it for future, rather than spending. It will definitely not help the economy at macro scale.

In my opinion, India is positioned best in most perspectives - human resource wise, politically (read stable government), diplomatically, financially, and in every other aspect. Yet, due to this lack of faith from the investor in the government, government's hurried actions are doing bad than good. When there is trade war and Brexit going on, we are situated best to gain from the loss of these major economies. But, who's gaining - countries like Vietnam!

What's even worse is, the government is not even willing to listen to most and not admitting that situation is bad! How would you trust such government then, while making major investments? Tell me, how many major plants have been established in recent past? How much new employment opportunities have been created? How many new homes and cars bought? We, as consumers, are delaying our major investments/purchases. In last quarter's GDP, government's stake is among highest, at it's peak in past 70 years. They are the only ones who're increasing spending. We are not!

Hence, I think, giving people money won't help. Creating stable and trustworthy environment, which inspires confidence for spending, will help.

[turbospooler]

The only change I think which can help increase the take home portion is make the actual House Rent paid entirely tax exempted. I am staying in Mumbai currently where the draconian rules don't let me take full benefit of the rent I am paying!

Compare this with the business owners who can offset the entire rent as an expense.

Salaried people have long been cheated on the tax front by stupid rules.

[BusyBoyKK]

Originally Posted by akshye

Hence, I think, giving people money won't help. Creating stable and trustworthy environment, which inspires confidence for spending, will help.

Very well said!

I think everyone commented here has a point.

Another observation - this economic instability, growing prices, and taxes are leading to the outward-migration of people. Many are moving out of the country for good. This is not a good symptom.

[DigitalOne]

Reading the posts on this thread is amusing. Most people seem to be following this "logic" :

This government is mismanaging the economy. The government is clueless and can't be trusted.
But I trust them to manage more of my pension EPF money well. So let the government keep deducting 12% of my money.

-----
Anyways, I don't like the above logic. I would be more than happy if government does not mandatory deduct EPF, not because of any national economic reasons, but because choice should be left to the individual. If EPF is a great source of tax-free returns (as it is) then individuals can make voluntary PF investment.

[longhorn]

Originally Posted by DigitalOne

Reading the posts on this thread is amusing. Most people seem to be following this "logic" :

This government is mismanaging the economy. The government is clueless and can't be trusted.
But I trust them to manage more of my pension EPF money well. So let the government keep deducting 12% of my money.

Your are missing the point here. Two things.

1. It is more like a forced savings for the future. Since it is already deducted before your salary gets credited to your account, you get used to it in no time. Very different from the amount getting credited in your account and then voluntarily transferring it to PPF.

2. The government has very little scope for fooling around here. They tried once during the Jaitley era. Mass protests showed them their rightful place. Moreover the rates are fixed for an entire year. No dilly dallying after that. Again, the protests ensured that they have very little scope to fool around unlike in other avenues.

[akshye]

Originally Posted by DigitalOne

Reading the posts on this thread is amusing. Most people seem to be following this "logic" :

This government is mismanaging the economy. The government is clueless and can't be trusted.
But I trust them to manage more of my pension EPF money well. So let the government keep deducting 12% of my money.

We are still a developing country; and we do now enjoy the financial security provided by government. The government can at-least do its share by providing some financial security, albeit using our own money. That's where those those 12% are to go in our future - our own financial security!

Peace!

[DigitalOne]

Originally Posted by longhorn

Your are missing the point here. Two things.

1. It is more like a forced savings for the future. Since it is already deducted before your salary gets credited to your account, you get used to it in no time. Very different from the amount getting credited in your account and then voluntarily transferring it to PPF.

Originally Posted by akshye

We are still a developing country; and we do now enjoy the financial security provided by government. The government can at-least do its share by providing some financial security, albeit using our own money. That's where those those 12% are to go in our future - our own financial security!

Peace!

As a libertarian, I don't fundamentally agree to government 'forcing' me to do anything for whatever they think is for my own good/financial security. I can think of how to manage my money on my own, thank you. The government must of course, promote long term saving habits (by giving tax breaks, for example)

If somebody can't think on their own, they can voluntarily ask the government to manage the money for them.

[sdp1975]

Going by the trend of recent years, I think there will some tax relief for those earning around the 5 lac mark. For higher earners there won't be any relief. There won't be any changes to the tax slabs or rates for sure given the fiscal situation.

[m8002?]

There is already talks of increasing the GST. Unless they make changes to the tax slabs, it will be a grave situation for salaried class immediately and the govt. later in time.

They dont understand that GST is a consumption tax. Increasing the price of goods can result in reduced consumption. Unless its basic food, clothing and fuel, increasing the tax will not result in proportional increased collections.

[aadya]

Originally Posted by DevendraG

. As per above article, Govt might give an option to Individual Tax Payer to lower their PF contribution to help increase disposable incomes -

This on the day when I increased my PPF investment to the maximum allowed limit. No government with working class welfare in mind would do this.

This is a dirty ploy to take away middle class money. Government tries to wash away its responsibility of protecting people at retirement. They are digging into PF because it is the highest interest yielding instrument, so they have less interest outgo at least for next couple of years if less investment comes into this. And the younger workforce with no inkling of what retirement would be is going to happily sign off the PF contribution to the minimum required mark and suffer after decades.

[SoumenD]

So changes in IT finally. But looks like with riders? One has to forego deductions and exemptions to avail this new rates. Not sure how the maths work. Needs some calculations