It seems that the government is not happy for people earning more and the raise of salary they get after many years of hard-working. If people want to have a very good quality of retirement and improvised lifestyle in retirement is that act of Fraud. We financial advisor advice investor to have financial planning and building a healthy retirement corpus and through asset allocation (debt and equity mixed with the same). But the recent new law seems like Government is not happy that a certain part of the society is maturing towards a happy and enjoyable retirement.
In this budget, it has been proposed that an aggregate limit of Rs 7.5 lakh covering employer contributions to the pension fund (PF), National Pension System (NPS) and superannuation fund. Any contribution beyond this limit will, therefore, will be taxable. As an example if an individual has a basic salary of Rs 30 lakh, an aggregate amount of employer contribution could be Rs 8.10 lakh – after adding 12 per cent PF (which means Rs 3.6 lakh), 10 per cent NPS (which means Rs 3 lakh) and superannuation fund of Rs 1.50 lakh.
Retirement planning for a country like India is completely different as compared to other countries. In other countries, we get social benefits but in India, the private sector has to struggle for his retirement planning. The government segment is blessed with Pension whereas private has to create his kitty. Do these new rules speak loud that don’t earn too much and your salary should be mediocre only?
The point is that why a salaried person is being penalised where corporates are given much leeway. Currently, there is no combined upper limit for deduction on the amount of contribution made by the employer. Now some will say that high bracket salaried person used to take undue advantage of the rules and regulation. Well, I don’t agree with this concept. A person takes years of hard work and experience to grow and make a healthy lifestyle. Capping success has now become an old story for India.
Well, this new policy has been adopted by foreign countries. Indian demographic culture is different as compared to what foreign countries has hence every tax law cannot be just copy-pasted. Indian have been very prudent is just copy and pasting rules and regulation from the overseas market to India but simply cannot understand that Indian economic structure is different.
Gone are the days when a qualified person has to search for a job and remain unemployed. The structure of the Indian economy has changed and will change more where the starting salary for a qualified candidate might seem like a shock but that is the new India.
All these types of laws are forcing the salaried class to go ahead with some other practices to skip taxation. If the per capita income growth and consumption is the theme then in such a situation it becomes imperative to have them grow rather just capping them and taxing them for revenue purpose.
Indian pay packages are low and struggling phase of growth leads to the justification of the high rise. In one had the government want consumption and on another hand, they just want top cap success, growth and growth of the economy.
It is also agreed that the ones who are earning a CTC of Rs.60 lacs or more will be one for whom this law becomes applicable but I am well sorry to say that becoming rich through earning a salary is much better than Wilful Defaulters.
A citizen has to play taxation on every aspect and now with GST in the place service industry is taxed at 18% which is too much compared to the historical service tax rates (under the old regime). Indian economy is now super-rich economy and please remember that every super-rich invest money into the economy through start-ups or angle funding or somehow the other way. Indian needs funding to grow at 8%+ GDP and this cannot be done only riding on Govt. investments.
If we want more entrepreneurship, SMEs and then start-ups to come up then one segment of the society needs to be capable and rich enough to inject the liquidity. In one hand we reduce corporate tax under the impression they will invest more which is unlikely and on the other side you tax those who earn a salary and have earned the same for better living and better investment within the economy.
Indian is now heading towards a capital intensive country where in the next decade we will get a lot of new Billionaires which is highly required. Capping these things is detrimental for society to grow and forces people to adopt and invent new malpractices.