Budget 2024: Personal income tax rates likely to be slashed

By: Admin
June 18, 2024
Categories: Income Tax News|News
4 Min Read

The government is reportedly considering reforms to the current income tax structure, particularly targeting lower income levels, to boost consumption, reported The Indian Express.

The report, quoting two government officials, suggests the budget announcement in July might prioritize tax cuts for low earners instead of increasing welfare spending.

These proposed tax cuts are intended to enhance disposable income, thereby stimulating economic activity and consumption.

The report highlights concerns about the steep rise in marginal income tax rates under the new tax system.

Relief likely for low-earners

The officials noted that tax cuts may be more efficient in enhancing consumption, rather than increasing welfare spending.

One of the officials quoted in the report said rationalising tax slabs will lead to greater disposable income, which translates to “greater consumption, greater economic activities, more GST collection”.

Currently, the tax rate begins at 5% for income starting at Rs 3 lakh, but escalates sharply to 30% for income at Rs 15 lakh. This sixfold increase in tax rate, despite only a fivefold increase in income, is deemed excessive and in need of rationalisation.

Implementing these tax cuts is expected to significantly boost consumption, a crucial factor for reviving demand and restarting the investment cycle, particularly in consumer-driven sectors. This move could also lead to increased GST collections.

As the budget for the fiscal year 2024-25 approaches, with a likely presentation in Parliament in late July, Finance Minister Nirmala Sitharaman is set to begin pre-budget discussions with industry groups around June 20, following a meeting with Revenue Secretary Sanjay Malhotra on June 18.

This budget will outline the economic agenda of the Modi 3.0 government, focusing on stimulating growth without exacerbating inflation, while securing resources for coalition commitments.

The overarching goal is to position India as a USD 5-trillion economy and transform it into a ‘Developed India’ by 2047.

The Reserve Bank of India (RBI) forecasts a 7.2 percent growth for the Indian economy this fiscal year, driven by improving rural demand and easing inflation.

Key priorities for Prime Minister Modi’s third term include addressing agricultural challenges, job creation, sustaining capital expenditure, and enhancing revenue growth to maintain fiscal consolidation.

The economic policies of the past decade have been positively received, with rating agency S&P upgrading India’s sovereign rating outlook to positive, and a potential further upgrade in the next 1-2 years contingent upon meeting fiscal deficit targets.

Despite strong tax revenues, non-tax revenue remains a challenge due to limited progress in strategic disinvestment, with the sale of Air India being a notable exception.

Source from: https://www.indiatoday.in/business/story/budget-2024-income-tax-relief-slabs-rates-consumption-boost-demand-welfare-spending-2554130-2024-06-17