FM hints at personal income tax rate cut: Report

The Union Budget may offer some good news for individual income tax payers. The government is considering reducing personal income tax rates to boost consumption after economic growth fell to 4.5% in the September quarter weighed down by personal consumption expenditure.

“Tax rate cut is among the many things we are thinking of to boost growth,” Finance Minister Nirmala Sitharaman said at an event in Delhi. To a question on whether the move could be announced in the Union Budget, she said, “Wait for the Budget.”

“Learned economists are telling us that we have to pause fiscal discipline and move towards fiscal stimulus,” she added.

Direct tax collection in the first eight months of the current fiscal year is not even half of Rs 13.80 lakh crore estimated in the Budget. A slowdown in the economy has led to a lower tax realisation. Last year, the government had missed its direct tax collection target.

A cut in personal income tax, which comes after a 15% cut in corporate tax in August, will mean a breach in the fiscal deficit target. But if the government allows a half a percentage point breach, it could create additional fiscal space for a little over Rs 1 lakh crore, according to private estimates.

Nirmala until recently maintained that adhering to fiscal responsibility and budget management act was sacrosanct to her and she would therefore ensure that her fiscal deficit remained within the target of 3.3% this year. But she has softened her stand in the past few weeks as growth assumes greater priority.

The minister also sought suggestions on how to boost consumer confidence. “I ask that question all the time. I do not want to think what I have done is enough. I want to know it from others. That question cannot be addressed by me alone,” she said to a question on what other measures the government could take to boost falling consumer sentiment.

On the Goods and Services Tax (GST), the finance minister said eventually, the rates have to be rationalised.

The GST Council, according to independent sources, is preparing to increase rates on luxury goods and rationalise the lowest 5% bracket. Gold could see a jump in levy by two percentage points to 5%.

Last week, Nirmala had said in Parliament that she was considering suggestions by some members on income tax rate cut as she valued the people who earned their living and took care of their family while paying their taxes as well.