Budget 2020: Experts decode impact on your personal finances

Budget 2020 has resulted in slight confusion over some important announcements. Whether it is the manner in which now the mutual funds are going to be taxed or is it wise to shift to the new income tax regime that is on offer. To discuss this Surabhi Upadhyay spoke to Archit Gupta Founder & CEO of ClearTax and Rajiv Bajaj Chairman & MD of Bajaj Capital.

On new versus the old personal income tax regime, Gupta said, "If you are above Rs 15 lakh there may not be much in the new regime for you to even look at. Between Rs 5 lakh to Rs 7.5 lakh of annual income you have to really evaluate between the two options. There are very confusing and micro scenarios in which one regime is better than the other one. If you have Rs 2.5 lakh as deductions and savings then that is a no brainer, you should absolutely take the old regime. Slightly above Rs 5 to Rs 7 lakh, it makes sense to be in the new regime otherwise it is toss up till about Rs 10-11 lakh. Even if you have deductions as much like Rs 1.50 lakh, it gets interesting to evaluate the old regime."

On mutual funds dividends being taxed in the hands of the recipient, Bajaj said, "This has come as a bit of surprise and I would not be surprised if this proposal is reviewed by the government because there are going to be a lot of representations from industry associations, we are going to do that. Essentially the intent as we know for the longest time investment in equity mutual funds has been tax-free and it is only in the last couple of years capital gains have been introduced on that. People are now used to that regime of paying around 10 percent tax on equity mutual fund investments. So if you make dividends taxable at the marginal rate and if you are in the 30 percent slab, then that is too hard a slab for an investor. It is almost illogical, it is hard to understand why it has been done. I am sure this will be relooked at but in the meantime, my advice to investors would be to look at the growth option and avail the capital gains regime because that is the simplest way to go around this if this were to remain."