[DevendraG]

Amidst the current slowdown, after a major benefit provided to Corporates in form of Tax Revision, there have been rumors that similar might be provided to Individual Tax Payers too to help spur economy by providing extra money in their hands. As per above article, Govt might give an option to Individual Tax Payer to lower their PF contribution to help increase disposable incomes - https://economictimes.indiatimes.com...w/72432078.cms

Assuming this is achieved in any form in the upcoming budget, do you think it could boost the consumption as predicted?

In my perspective, Lower Tax Bracket (younger lot) might take the extra income & spend it on goods - good for economy
Whereas Higher Tax Bracket (conservative lot) might invest it back to probably try & earn more than PF returns - businesses are funded and in turn helps them improvise/expand which is good for economy.

In either case, it seems like it will help the economy but this point does not feature in the recommended list of steps for revival by our former RBI Governor Raghu Ram Rajan here - https://www.indiatoday.in/business/s...829-2019-12-06

What are your thoughts?

Mods - I could not find a similar topic recently. Pls merge if it already does. Thanks.

[srini1785]

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 -

Did not read the full article but only based on the above statement, IMO, it may be too late too little. Provident Fund contribution, at least for me, is too sacred a part of savings that it should not be meddled with under any circumstances. Instead they must raise minimum taxable income to a higher slab and rationalize tax slabs so that 7-15 lakh PA tax slab comes to 20%. A relief on the interest on EMI part would also help.

However there are larger issues which are wrong with the economy which a simple tweaking of tax slabs or PF rules can solve. The problem with economic policy handling is that everyone is a economist.

[longhorn]

The first thing these freaking morons have to do is to decide the GST rates once and for all. Of course there can be slight tinkering here and there but the way these bozos have been functioning leaves a lot to be desired. Wild swings in the tax rates coupled with innumerable cesses on top of existing rates is not my definition of a simplified tax regime.The way in which they have been going bonkers at every GST council meeting shows their immaturity. They haven't the slightest clue as to what to do. Hell neither do they know the basics, nor do they listen to those that do.

You don't stimulate demand by digging into your pension. That's a pretty dumbass thing to do. Instead why not ask the banks to pass on the lowering of rates by the RBI or reduce the loot on fuel prices or reduce taxes on essential commodities or rationalise income tax rates in keeping with the current cost of living. Put money in the hands of the people. That's the right thing to do if you want to stimulate demand.

[SideView]

No matter what the government does, it is the climate of uncertainty that is spooking people.

The IT lead property/real estate boom is slowing down (together with blacklash on black money), we need to find other avenues to spur growth.

[DigitalOne]

People will anyway base their opinion on whether you like this government or don't; So it is generally useless to convince either way :-). But for whatever it is worth, this is just one of the moves the government is considering apart from Income tax cuts. This suggestion was originally made in Budget 2016. [Source]

The suggestion is a part of the proposed Employees’ Provident Fund and Miscellaneous Bill, 2019.

This is in-line with announcements by late Finance Minister Arun Jaitley in Budget 2016. However, Jaitley specified "below a certain threshold of monthly income, contribution to EPF should be optional", it noted.

An official told the paper that the enabling provision for reduction had been adopted as worker’s share cannot be made optional completely to provide "some sort of social security cover".

As a Libertarian I support this. Government shouldn't force whether/what/ where I invest for my pension. It should be left to the individual. EPF should be entirely voluntary.

[DevendraG]

Originally Posted by srini1785

Provident Fund contribution, at least for me, is too sacred a part of savings that it should not be meddled with under any circumstances. Instead they must raise minimum taxable income to a higher slab and rationalize tax slabs so that 7-15 lakh PA tax slab comes to 20%. A relief on the interest on EMI part would also help.

However there are larger issues which are wrong with the economy which a simple tweaking of tax slabs or PF rules can solve.

Very true, our Govts have been painstakingly slow to respond and the approach has always been reactive and NOT pro-active. And I too would not touch my PF give an option especially considering we do not have any solid Govt Retirement schemes.

Originally Posted by longhorn

The first thing these freaking morons have to do is to decide the GST rates once and for all.

Moron is the modest word in relation to the way GST has been/is being handled. And very rightly Raghuram Rajan too highlighted the need for stability in Tax Rates not only to lay foundation for better forecast & planning but also to attract Foreign Investments.

Originally Posted by longhorn

Instead why not ask the banks to pass on the lowering of rates by the RBI or reduce the loot on fuel prices or reduce taxes on essential commodities or rationalise income tax rates in keeping with the current cost of living. Put money in the hands of the people. That's the right thing to do if you want to stimulate demand.

Totally agreed!

Tax slabs haven't been in sync with rising income/inflation and every year a mimickery of slab rejig adds pressure on to higher tax paying individuals/corporates which eventually ends up in corrupt pockets and give-aways post the election season.

Decentralization of Fuel pricing too has largely not benefitted the general public and the last dip in crude oil prices saw Govt increasing taxes to fill this gap. Same goes for Bank Interest rates too.

Originally Posted by SideView

No matter what the government does, it is the climate of uncertainty that is spooking people.

The IT lead property/real estate boom is slowing down (together with blacklash on black money), we need to find other avenues to spur growth.

Global uncertainty, IT transformation pace, medical/education/general inflation, salary stagnation etc has led to people becoming very shrewd on big ticket purchases. We already have another thread mentioning Global Auto Sales Tanking due to these and other reasons.


Assuming Govt ends up leaving us with surplus cash, we the general tax-payer would either increase our expenditure or increase our investments, either of which should help the economy, so why isn't anybody suggesting this obvious. I on the other hand would've preferred this move before the Corporate Tax cut so Corporates can sense the demand surge before expanding.

[m8002?]

Originally Posted by DevendraG

I on the other hand would've preferred this move before the Corporate Tax cut so Corporates can sense the demand surge before expanding.

This did not "cost" the govt. anything and they got a lot of PR. When companies are making losses, how does lowering the corporate tax rates help?

They should have corrected ( I wouldnt say lowered ) the decades old personal income tax and the recent LTCG changes to boost demand but then that will impact the revenue. So they kept it as is.

[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.

So in effect, at a conservative estimate, close to 50% of ones earnings, goes right back to the Government. Which means in a year, we are working 6 months of it for the Government. Why should a person who pays income tax, be forced to pay all these other taxes too?

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.

While increasing the tax net for the greater good, they can also offer some relief to the tax paying Indian, by increasing many of the following, in line with the actual reality in the market, in terms of costs- the home loan limits, the starting tax slabs, the concessions being granted for healthcare and maintenance of senior dependents, the Leave travel concessions, education expenses, etc.

[2000rpm]

The income tax is currently a one-sided game completely in favour of the government. We citizens (honest ones) are at the mercy of the government for any relief. Please read article below to understand
https://www.businesstoday.in/moneyto...ry/191947.html

This government shamelessly reduced corporate taxation because of the noise created by the corporate leaders. We didnt create any noise, hence we get nothing. I seriously doubt the brain power the current government has for doing the right thing, especially after demonetization (poor thought poor implementation), GST Implementation (good thought poor implementation) and not corporate tax cuts (poort thoughts good implementation expected).

[pavanmadhini]

IMO, the 30% tax slab should only apply to people earning more than 20 lakhs. IIRC, this slab hasn't been changed in the last 8-9 years, and it's about time we accounted for inflation and higher cost of living before taxing honest, salaried employees earning between 10-20 lakhs at 30%. And keep in mind that these people will again pay tax between 15-30% of their post-tax income as indirect taxes (Road Tax, GST, Entertainment Cess, that cess, this cess).
In terms of Government Income, this move would result in a hit of about 20,000 crores annually. But this 20,000 crores will spur consumer spending since this would be going directly to the upper middle class which would spend more if they had more cash flow.

[civic-sense]

Well, I would want this govt to do a lot of things. But looking at the way they have handled the economy during the last few years, I'd say - JUST STOP.

Just take your hands off. Don't touch anything. Send the finance minister on a permanent vacation and leave things as it is. At least we would be assured that there won't be any more disasters.

HANDS OFF OUR ECONOMY!!!

[itsmb]

Originally Posted by longhorn

The first thing these freaking morons have to do is to decide the GST rates once and for all. Of course there can be slight tinkering here and there but the way these bozos have been functioning leaves a lot to be desired.

with you except for the choice of words, I feel you have been very humble.
The way I see current steps to boost economy is equivalent of being offered a Tata Multi Axle PV for B2B(city) traffic and an Atlas cycle for Motorway.
Young blood is generally not aware of the importance of "savings", PF is a good option of forced saving which can help them in need. Ironically, this country need jobs not more take home salary. Unemployment is at peak.

[ashikthomson]

I don't think giving an option to lower the PF contribution is a good idea. This is not something which increases our capacity, but it is more of a workaround for current trouble. This PF contribution is big part of our future savings and allowing everyone to utilize it now means economy will get into deeper troubles in future. Rather, what we need is a solid policy to curb rising prices of essential commodities and implementing transparent and fair enough tax schemes.

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.

So in effect, at a conservative estimate, close to 50% of ones earnings, goes right back to the Government. Which means in a year, we are working 6 months of it for the Government. Why should a person who pays income tax, be forced to pay all these other taxes too?

As he said, because of various bills and reforms which are scattered, we pay a whole lot of our income in the form of tax, back to government. GST was implemented to solve the problem, but it has not been a success, which it should have been.

Lot of thoughts need to go in here, on how to keep the tax policy really DEMOCRATIC and fair for all. This in turn will provide huge extra savings in our hands and can sustainably bring back our economy.

[ZenMaster]

This so called reduction in income taxes is just a hogwash to take peoples mind away from the immense loss they are otherwise going to have from increased GST (tax on goods)
We all know that the percentage of people paying income taxes in india is very low. The govt. Knows that the gain in revenue from increasing GST clears the loss of income tax by a wide margin.

Most of india do not pay income tax. The real reason people are not buying anything is because everything has become too expensive to support with their income. Everything including food is going to be more expensive thanks to goat's stupid GST rejig.

[emkay.india]

This is a stupid idea - whoever conceived it must've been in dope while thinking this. As someone rightly said, PF is a kind of forced saving which the current youngsters don't think about. I for one have been deducting my salary for voluntary PF apart from the regular PF. I only hope if and when they make this live, they make it as an optional one.