The writer, viewing the new tax regime through the political lens, seems unwilling to appreciate that it is part of the gradual long-term shift towards rationalisation and simplification of tax administration and compliance through the lowering of rates and phasing out of deductions except for essential savings such as Provident Fund and Pension Plans (Editorial page, “Complicating the tax regime further”, February 7). Savings should be need-based depending on the financial profiles of taxpayers. The principle,” from each according to his ability, and to each according to his needs” should guide investment decisions. The current tax rules commandeer the hard-earned money of taxpayers and misdirect it towards investments merely as a source of claiming tax deductions. For instance, the packaging of insurance as a savings instrument, especially by the LIC’s agent-dominated system, misallocates resources and fetches low returns for the investors who could have opted for a cheaper term insurance policy to ensure life cover.
Lifelong employment is a privilege limited to government service. The new tax regime expects future economic transformations to alter the job market in radical ways. The knowledge explosion would make the workforce bear the burden of re-skilling, re-learning, and job-hopping. A simple tax regime would help to prevent their precious earnings from getting locked away in unremunerative and needless financial products.
V.N. Mukundarajan
Thiruvananthapuram
