New Delhi: In an attempt to increase disposable income for the middle class and drive consumption, the Finance Ministry of the central government is now planning to revamp personal income tax by rationalising it.
While the ministry is yet to make an official announcement, the relaxation on personal income tax comes after the government had slashed corporate tax rates, extending relief to domestic traders, investors and SMEs. The move on corporate tax rates was celebrated across spectrums making India’s economy more competitive.
Government has been working to simplify the existing income tax laws and introduce new reforms in line with the recommendations of the high-level task force set up by Direct Tax Code (DTC), officials were quoted by Hindustan Times.
In a report submitted to Finance Minister Nirmala Sitharaman on August 19, the DTC task force adviced the government to expand the tax base, start income tax slab from Rs 5 lakh, which will make a taxpayer’s life much easier.
As a result, the government panel had proposed a zero tax levy on Rs 0-2.5 lakh, 10 per cent on Rs 5-10 lakh, and 20 per cent on an income of Rs 10-20 lakh.
Currently, personal income tax is levied at 5 per cent for income between Rs 2.5 lakh and Rs 5 lakh, at 20 per cent for Rs 5 lakh to Rs 10 lakh, and 30 per cent for an income of over Rs 10 lakh. For those earning above Rs 20 lakh and till Rs 2 crore, the income tax slab will continue to remain at the previous rate of 30 per cent.
“The job [of the officials] is to present various options – with or without existing exemptions – and present the same before the competent authority [political leadership] to take a final view, who will also decide the timing of the announcement,” one of the officials told Hindustan Times.
There has been a rising demand for a rate cut in tax provisions as a requirement to boost the staggering economy that India is facing. On September 20, the government had announced the corporate tax cut for domestic manufacturers, reducing the tax rate from 30 per cent to 22 per cent. At the same time, the tax rate for new manufacturing companies was lowered from 25 per cent to 15 per cent, barring exemptions.
The announcement was not only deemed as a corrective step to revive the Indian economy but also a move to promote Modi government’s Make in India policy.