You're watching the money Show's budget hotline Special Revere gravy recording all the fine print on the nitty gritty ease off budget 2020 as was announced by Finance Minister Nurmela.

See German and more specifically on the topic off personal taxes and direct taxes because that is something that all of us had our eye out on.

After all, that's one topic that impacts everybody from you and me and even the richest man off the country.

So to talk about that and more I have with me homey mystery off Deloitte, India.

Mr Mystery, Thank you so much for joining in on the money show up.

And like I said, you know, there was a lot of focus on personal in contacts.

In fact, even before the budget, you told me that personal tax is going to be the topic to talk about.

But I suppose everything is not happy news in the topic of personal stacks for all our individual abs individuals out there so largely just to set the context wondered, you make large Leopold's personal tax provisions, and then we can start off with a secret, right?

So I think the main one is about this new scheme.

Yeah, whereby you can go either under the old regime and clean certain deductions that you're already getting and pay taxes the normal rates, or you go under this new Reggie, which has been announced yesterday.

But then you have to forgo certain deductions, certain exemptions, et cetera.

But then you have to pay tax at a lower it.

So before one can even take a call like this, whether one should want the old or the new, they would have to do a comparative analysis.

What were they being under the old regime?

What was income under the old regime?

What the taxes under the old regime without is now what is going to meet attacks under the new regime so the tax rates would be lure?

But you'll have to forego a whole host off such exemptions introductions.

So, for example, in the past what they were a lot of popular kind of reductions, especially outside employees.

They would claim an HRT exemption.

Declan exemptions in for leave travel allowance.

They could claim exemptions under the popular Section 80 c B F investments or Provident Fund, Public problem front investments et cetera.

Vehicle clip deductions in under the other section for MPs.

Yes, they could claim deductions for tuition fees.

They could directions, even for payments made out of l s is for life insurance, et cetera.

On in for medical insurance, et cetera.

Evening savings interest was exempt up to ₹10,000 for an individual less than 60 on in region 60 years and about could claim up to ₹50,000 for interest on fixed about etcetera.

So now all that if you want to go under the new regime, you can definitely go.

But then you pay Lou attacks, but you will forgo all those benefits.

All those deductions, all those exemptions.

So these are the most commonly used exemptions.

I mean, you know, I think almost everybody will be having that am I that maybe being on the house so one and 1/2 lack rupees gone Plus another to lack rupees on the interest as well going.

L i c p p If I think these are very and everybody has a PPF account is went running, you know, I mean, that's one of the most commonly own savings scheme, so I mean, if I look at it that way, then for a 5% benefit that I'm getting in the new tax regime.

I don't see why I should let go for these payments are making in the tax of, you know, the tax benefits available because of that universe beside them.

For you were getting the standard deduction up to 50,000 on.

There was no investment.

You were getting it Even that will go if you go to the new regime.

So my advice would be to somebody that please analyze your income.

Your estimated income from starting from April 2020 onwards estimated See what the tax is going to be under the old Reggie and see what's gonna be the tax under the new regime.

One other important factor that we'll discuss later.

But that's also to be considered, because when you estimate your income, it's not only going to be your salary income, they could be in cover house property.

If you let our property, that could be some gains.

And now the government says we're also going to tax the dividends that you received from cooperates or during that you might receive from various mutual funds.

So that's also a factor to be born in mind.

One would have to estimate that kind off income, etcetera.

So one should start working on it, maybe from this month itself, so that one is ready for before April on for the next fiscal year that April 2020 on.

Would you remind you, by the way, for all of you was it important to know that this tax option is available for the April 2021 Much 2021 Fisk.

It's It's not good.

It's risky.

It's the next fiscal, just in case.

A fabulous were unfair of that.

Okay, so you know she, in fact, FMC Thurman, in horror in her budget speech, mentioned that the tax structure right now in India is very complicated, and an individual finds it extremely difficult to file their returns, you know, without taking the help of tax expert and hence these, you know, the second option.

But I suppose it's raise more questions in the minds of individuals.

She has said that there was some 100 exemptions in the current act, and I think 70 will not be allowed in the new option.

So water those fuel 30 that are actually allowed.

I mean, have you checked on that?

Yeah, there are a few which we will still get currently, for example.

Example, one important thing which you can still get is the the the investments that the employer makes under NPS.

Also currently, when an employer makes under NPS up to 10% off, your basic salary is not taxable.

Okay?

It's tax neutral when the employment said contribution, so that will not be hit by this on.

For central government employees, it's not 10% it's 14%.

So that is one important factor.

There are other things also.

For example, if you get this kind of leave and catchment or you get these various benefits at the time of separation, et cetera, even that will not be liable for any kind off.

You know, you won't be affected by this under the new regime.

Okay, But I think it's mostly employers contribute their you know, it's mostly to an E p f.

It's very rarely to entering Pierre.

So maybe as an employee, if I do want to switch over to the new option, I can tell my employer that you know what?

Maybe I want true the 10% cap off my salary to go into a national pension skin.

So if I'm getting that little bit of deduction when I switch over to the new scheme and if it's working out, I'm getting adequate savings.

Then why not?

I suppose Why not on option available?

You know, for our employees now, since I am on the topic of Contribution to Provident Fund, this is something that FMC Thurman did not announce, and that's why we call it Devil in the details.

There's a cap now on the Provident Fund as well.

If you could elaborate on that, right, So what?

The law says as off today that if you work if an employer contributes toe, approve superannuation fund in excess of one and 1/2 lack rupees that excesses taxable in the hands of the employees.

Up to 12% of contribution to a provident fund employs barn front from the employer is not taxable on up to 10% for an employer other than a central government employer and in the central government can car contributes, that's up to 14%.

Those contributions were not under NPS would not be liable for tax what the government is now saying is that people in the low income, unfortunately, this kind of contributions will really not be possible because they really would have that kind of money that employ would not have that kind of money to sort of contribute for all of them.

So the people in the higher category they're getting benefits by way of higher contributions to Employees Provident Fund or To Superannuation Fund or even two MPs.

So the government says is wants to propose to change the law.

And it says if the combined contribution for NPS for Employees Provident Fund and for Super Nation Fund by the employer exceed seven and 1/2 lack rupees in one year in a year, enough, Scalia then back is going to be taxed.

Andi have also stated that if you get any kind off income on that, supposing some interest or some dividends or any gonna similar accretions to that on the taxable portion, even that is going to be taxed.

We'll have to wait and watch because they will have to come out with certain guidelines, rules and regulations in connection with this is even if I'm not withdrawing my peer not humiliating, and it's a contribution being made by the employer.

Okay?

And even if that interest I'm not, I'm not yet.

We're drawing the PF.

It'll still be taxable if it exceeds seven and 1/2 life if it exceeds along with the other countries.

But we have to wait for the guidelines to see how they're going to determine this interest and the other creation.

Exactly.

Yes, because I think that would be a beautiful, complicated calculation.

I mean, do you do it on the balance about seven and 1/2 lakh rupees, or is it going to be on the entire corpus?

Because I suppose if it's on the entire coppers, then that could be quite a hefty.

Remember what it says right here.

It seems to be only on the taxable part off it.

Okay, so let's see it hypothetically.

If the employers contribution, let's visit it lack rupees, it possibly will be only on the 50,000.

That's possible, so we'll have to still wait for the guidelines.

But it's for the government to confirm this, but I suppose all our high income earners and high salaried owners will be hoping that it is if that's the case essentially so effect effectively to understand the implication of this new rule of the provident fund bit, who would you say is at a loss?

And it does anybody that any individual, any salaried person stand again with this new rule?

No.

So with this kind of new room, obviously people who earlier not paying tax and once the threshold is crossed, they're going to pay tax so high income.

So that place.

That's what the focus is on the high income earners in certain other cases.

Also, for example, many foreign nationals when they come to India they are.

They come from a country where India's not sign what's called a Social Security agreement, for example, it'd they come from the U.

S.

Or from the UK, and India has not signed a Social Security agreement.

They also have to contribute mandated Rito India's Problem fund, And that could be a significant amount because it's a 12% on a basic amount and it's a big amount.

Very often, the employee picks up that tab also not only of the employees Tab is picked up by the employee employer, so you know that could also increase there tax effect on just a quick question.

The employers contribution is that included in the CC of the employees Know right, that's an over over and above contribution.

Some MPs employees.

Generally, what they do is that they were a factor.

And even the employees contribution topi everything onto even superannuation fund.

Okay?

And they say that the whole thing is your C D.

C.

Okay, All right.

So that depends.

You know, company to company, a one year contract.

The agreement is the employee agreement is okay.

Fair enough.

So I think largely as long as the Provident Fund Superannuation Fund contribution NPS contribution to Theodore is under seven and 1/2 lakh rupees.

You're fine, but it continues to stay exempt.

Exempt, of course, until the time off withdrawal, or if you're not working, that's when it gets taxable.

But when it goes above seven and 1/2 lakh rupees, then it's a problem.

And I think Mr Mystery safe to assume it's a very small percentage of the population who get a contribution of seven and 1/2 lakh rupees from only the employer.

That would be a small population.

Okay.

All right.

So I suppose a majority of the population right now.

At least it doesn't have to worry.

It's, you know, the higher owners that would have toe sort of look at this provision very, very carefully.

The other part I wanted to talk to you about is the laws with respect to residential status.

Because there have been two weeks of there is well on dhe.

I know a lot of foreign viewers out there may be unaware, but you know, there is a resident.

Then there is a non resident.

And then there's something called us resident, but not ordinarily arrested it.

And, you know, frankly, it sort of didn't jog my memory back to when I was studying this, which was almost about 10 years ago.

But what exactly is the new provisions for these three categories?

Right.

So what now?

The new provision states, and there are some distinctions mention earlier in the case.

If you were an Indian citizen or a person of Indian origin who was living outside the country and used to come on a visit to India, you could come on a visit to India for a peer of nearly of six months, about 1 81 days on, he would continue to be not taxable on your foreign income.

Okay?

You would still be classified to be like a non dress.

It's roughly six months, about six months now.

What the government says is that a lot of people have been coming.

They've been trying to manage the affairs, the sort of stateless people they're not paying tax year.

They're not being tracks anywhere else.

That's not acceptable.

So what they're saying on the one hand now we want these people to reduce the pattern off stain India from 1 81 days to only 1 20 days.

So three months, four months.

So if that India vote for 119 days, it's still fine.

But if they go about that, then they could become a resident.

Okay, so that is one condition.

The other condition that they've also brought in is regarding again this concept off a resident on or near Essen and resident, but not our nearest you mentioned in the past.

There were two conditions either the conditions of your fulfilled if you were non restaurant for nine out off 10 previous years.

Okay, then, in that case, you could be classified as a not odd need, resident.

Okay.

Or in the seven years preceding the relevant year, you're in India for a peer of less than 7 30 days.

Okay, you would be classified also as a not ordinary resident.

Okay, so if you classify if you're satisfied either of these conditions the advantage was that you were not liable to pay tax on your foreign income.