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Budget 2020: Massive income tax relief on cards for taxpayers

Last Updated 23 January 2020, 04:51 IST

With much at stake in Delhi Assembly elections, the government may bite the bullet and cut personal income tax rates, a move that is being held as a sentiment positive for the middle-class voters.

Several rounds of the last minute high-level discussions between senior officials of the ministry of finance and the Prime Minster’s Office indicate that the government is planning to revise the tax slabs, where the personal income of up to Rs 7 lakh may be taxed at the rate of 5%. While Rs 7 lakh to Rs 10 lakh will be taxed at the rate of 10%, income between Rs 10 lakh to Rs 20 lakh will be taxed at the rate of 20%. Income above Rs 20 lakh is expected to attract 30 per cent tax.

At present, income between Rs 2.5 and Rs 5 lakh per annum is taxed at the rate of 5%, between Rs 5 lakh and Rs 10 lakh at 20% and, income over Rs 10 lakh is taxed at the rate 30%.

A senior official, however, told DH that the proposal is still at the discussion stage and the government is weighing its financial position before giving a final shape to much-demanded tax relief.

He said that the government has received a maximum number of requests for a personal income tax cut from the public. Even industry and trade associations have demanded relief in personal income tax for the salaried class as a measure to enhance demand in the economy, which has been facing an acute consumption slowdown.

Late in December, after the official estimates suggested a modest 5% economic growth for 2019-20, Prime Minister Narendra Modi had sought ideas for the Union Budget from 130 crore Indians.

Prior to that, in November the Department of Revenue, for the first time, put out circular seeking suggestions for changes in income tax rates as well as in indirect taxes such as excise and customs duty.

The demand for personal income tax cuts has been gaining currency ever since the government affected a major cut in corporate tax rates in September last year. Industry bodies, including Ficci and Ph.D. Chamber, have supported the idea.

The Confederation of Indian Industry, CII, has, however, said a reduction in personal income tax could wait while the government fixes bigger issues related to non-banking finance companies, infrastructure, and credit flow to micro, small and medium enterprises.

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(Published 22 January 2020, 15:15 IST)

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