Government planning change personal income tax slabs to increase spending
After extending relief to traders, investors, and SMEs by reducing corporate tax, but it is yet to provide relief to the middle class, waiting for a rebate in income tax. But not to worry, the government is planning to rejig personal income tax in order to increase disposable incomes, especially among the middle class.
According to report, the government is considering rationalising personal income tax rates in a move that will result in the increase of disposable incomes, especially among the middle class, and hopefully drive consumption and, therefore, growth. Government officials told the leading daily that they have been working on simplifying archaic income-tax laws and rationalising tax rates in line with recommendations of the task force on the Direct Tax Code (DTC), which submitted its report on August 19. The objective is to enhance compliance, expand the tax base and make lives of the taxpayer easy, the officials said.
The Committee on Direct Tax Code has suggested a new income tax slab, which should start from Rs 5 lakh, asking the government not to levy any income tax on annual earnings up to 5 lakh. Apart from this, the tax rate should be 10 percent on the income of Rs 5-10 lakh per annum. Currently, this slab attracts 20 percent tax. The first official told the Hindustan Times, “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.”
On September 20, the finance minister announced slashing of corporate tax rates for domestic manufacturers from 30% to 22%, while for new manufacturing companies the rate was reduced from 25% to 15%, provided they do not claim any exemptions.