After the budget came, there was a lot of volatility in the market
In one day the market went down by 2.5%
A lot of sentiments were changed and retail investors like you and I reacted in different ways
But there were a lot of things in the budget which we did not understand properly
Because of which we thought of making another video in which we will talk in a lot of detail
About tax
And about those things that impact investors a lot
I, Jagdeep Singh, welcome you to the Groww channel
Let us start today's video
In which we will first talk about tax
That you still might be very confused about tax
You still wouldn't understand what the old regime and new regime is
And in which regime should I file my taxes
When the budget was brought out, two types of taxes were spoken about in the budget
The old tax regime and the new tax regime
The first thing we didn't understand is what is the difference between the two and what were the changes in the new one
If I tell you in very simple terms
In the old tax regime we used to take deductions, which means
If your salary is Rs 100
So there were some provisions in tax through which you could get deductions
Consider that I invested somewhere
It is possible that if my salary was Rs 100, out of that Rs 10 could be deducted
The tax that I have to pay will only be on Rs 90
But if I talk about the new tax regime
Then it is clearly mentioned in this
The way to get deduction in this are very complex
Because of which retail investors like you and I had to go to professionals
And file taxes
Because of which the government has said that they are going to bring out a new tax regime
In which we will simplify tax a lot
But in this the biggest difference will be that the deduction we used to take in that
We won't be able to take that deduction in the new tax regime
But there is a new difference in the old and the new
That the tax rate in the old one was slightly more
Now the tax rates have been reduced
But the deduction you used to get before, you won't get that now
Now you have understood the difference
But now you must want to know that in which slab, how much the tax was before
And how much that has been reduced to now
As you can see on my screen
I have divided the income in different slabs
And corresponding to that I have told you what the tax rate was before
And how much that has been changed to now
Like if I talk about, upto 5 lakhs
Until now you had to pay a tax of 5% tax on incomes above 2.5 lakhs
Which has been reduced now to become 0%
Which means that if your income is upto 5 lakhs
Then you won't have to pay any taxes
If I talk about income between 5-7.5 lakhs
Before you would have to pay tax upto 20%
Which has reduced now to become 10%
Doing this, if you look further you can see between 12.5-15 lakhs
Tax rate has reduced from 30% to 25%
But if your income is more than 15 lakhs
Then even before you had to pay 30% tax
And even now you would have to pay 30% tax
But now the question comes
As a taxpayer, which regime is right for you
Should I take the deduction and pay tax on the previous tax regime
Or should I pay on the new one
So this is a very complex question and it cannot be answered in one word, which one is better
Because it depends from case to case
It can happen that you have a very high salary
And on that you take a lot of deductions
And it can happen that the old tax regime benefited you more
And you have to pay lesser tax
But it can also happen that you don't invest
You did not take deduction at all
So the new tax regime will be more beneficial for you
Because filing taxes here is also very simple
And the tax rate you have to pay is also less
So for this you have to do a little back calculation
That in your case
From which way will filing taxes be easier
If I tell you in very simple terms who gets the most benefit
So the biggest benefit is for the people whose income is upto 5 lakhs
Because if your income is upto 5 lakhs
Before you has to pay a little taxes
But now you won't have to pay any taxes
Now I will talk about the second announcement
Which impacts investors like you and I and a lot of retail investors like us
And that was the announcement on Dividend Distribution Tax
The government has said that they are removing dividend distribution tax
Which the company's had to pay
But let us understand this in detail
How does this impact us as an investor
If I explain this to you with an example, there is a company whose earning is Rs 100
So on 100 Rs earning if the company feels
That they have to distribute Rs 50 as dividend among its shareholders
Then at the time of distribution they had to pay taxes
Which was 15%+cess
So after this tax was applied, the remaining money was distributed among the shareholders
Which means that until now we used to say that dividend is tax free in the hands of the investor
Because the investor, until now did not have to pay any taxes
But the tax on the dividend was paid by companies
But the announcement in the budget now
After that it was said that the companies
When they have to pay the dividend
They don't have to pay any taxes
So now the taxes the companies had to pay has been removed
So now if I talk about dividend, the dividend that the investor gets now
According to their income tax slab, they have to pay income tax on it
Which means that the biggest benefit of this would be on people whose income is between 0-5 lakhs
Because before they had to indirectly pay some taxes
Now the people whose income was between 0-5 lakhs
There even the companies won't pay any taxes
And the investors who came in the 0-5 lakhs bracket
Even they won't have to file income tax
But if I talk about the rest of the investors who come in the 30% income tax slab
Before the companies used to pay taxes
Now when the investors get the money in the form of dividend
They have to pay the tax according to their income slab
But now you must be wondering how this works in the case of mutual funds
So even in the case of mutual fund it will work in the same way
Whichever income slab you come in
That much income tax you will have to pay on dividend
Now I will talk about IDBI bank
The government has said in the coming time they will sell IDBI bank's stake
Because of which in the same day the stake of IDBI bank went up by 13%
Which now used to trade at the level of 34 now trades at the level of 38
But if I talk about today then it came down again
But now you must be thinking whether this is a positive or a negative news
And as a retail investor should I invest in IDBI bank or not
So let us talk a little about IDBI bank's financials
If I talk about IDBI bank's financials, then it is a loss making bank
If I talk about its September 2019's quarterly result
Then this bank had booked a loss of about 3,449 crores
But I always tell you that whenever you look at a company's result
You should compare it to the same quarter of last year
So if I talk about the same quarter of last year
Even then IDBI bank has booked losses
Apart from that if I talk about its CASA ratio
Then IDBI bank's CASA ratio is more than 30%
So if you're thinking of investing here
So first you should look at the bank's long term plan
Then you should see how this bank is thinking of diversifying itself in the future
And how its financial performance can improve in the coming time
And only after looking at all these parameters should you decide whether you want to invest or not
Because investing in a company based on one news is not a smart thing
So whenever you invest, as I always tell you
You should look at long term and the company's fundamentals and only then decide whether you want to buy or not
Let us talk about the next announcement which was LIC's IPO
As you know that even now insurance is very under penetrated in India
And a lot of retail investors want to invest in insurance
So it can be a very good news for them if the government brings out LIC's IPO
But only an announcement has been made
Only in the coming time will we find out how big the IPO will be
And how the government will dilute that
And after that you should read LIC's business model in a lot of detail
And if and when the IPO comes, we will try to make a very detailed video on it
But I will tell you again, that this is just an announcement
Until we get all the details about this, we cannot comment on it
So what we spoke about today were only the things that impact retail investors like you and I a lot
Because in the last video we gave you an overview of the budget
But we didn't speak about it in a lot of detail
But if you haven't seen the overview of the budget
You can click the link in the description and watch the video about the overview of the budget
But we thought that there is a lot of confusion about tax in people's minds
And they don't understand how that impacts them
That is why we got this video for you in which we told you about three things
First, about tax
In which we compared the old tax regime to the new tax regime
And we tried to give you an idea
Which one can be right for you as a taxpayer
Apart from that we spoke about dividend distribution tax
And we spoke about its implications that as a retail investor
How that will impact you now
Apart from that we spoke a little about LIC's IPO and IDBI bank's financials
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I will end this video with a question for you
Comment and let us know which portion of this budget did you like the most
And what is the reason behind that
And according to you which tax regime will be the most beneficial as a taxpayer
Apart from these as well, there can be a lot of questions in your mind as a retail investor
So we have started a new series called #AskGroww
Because of which you can use the #AskGroww and under any video
You can ask us any investment related question
And we will try to answer all of your questions in great detail
And in the series we will choose some questions and and discuss them in detail in videos
So if you have any question in mind, you can use the #AskGroww and ask us any question
So share and like this video and comment and answer our question
Happy investing!