The government is considering several proposals related to income tax before the budget with an intention to increase consumption and bring economic growth. Under this, proposals such as keeping a flat tax rate without exemptions, creating new slabs for high income and reducing personal income tax on the lines of reduction in corporate tax are being considered.
A government official said that before taking decisions at the highest political level, the finance ministry will give its opinion about the pros and cons of these proposals. The budget will be presented in February. The official said, 'All options are being considered. Before taking any step, it has to be seen how much it will benefit the overall economy and what will be the cost of this step.
30 million people benefit!
One option to reduce income tax is to give more money directly to the people or increase the expenditure on infrastructure through schemes like Pradhan Mantri Kisan Samman Nidhi. The official said that any change in the structure will only benefit 3 crore people who pay income tax. He said that along with increasing consumption, it has to be seen that there should be a balance in the burden on the benefits and the exchequer. He said, "Increasing spending on infrastructure sector will have positive effects on many other sectors."
There has been hope since the reduction of corporate tax
The government has given a relief of Rs 1.45 lakh crore in the form of reducing corporate tax, but it is considered to be a move aimed at attracting investment. After this deduction, the demand for reduction of personal income tax also started gaining momentum as no relief was given on this front in the previous budget. At the same time, tax was increased as surcharge on high income people.
What can be new slabs?
The committee formed to review the direct tax had recommended a 10 percent personal income tax rate for the annual income up to Rs 10 lakh. It had suggested a tax rate of 20 percent on annual income from Rs 10 lakh to Rs 20 lakh, 30 percent on annual income from Rs 20 lakh to Rs 2 crore and 35 percent on income above Rs 2 crore. It did not recommend any change in the current income tax exemption limit. He also recommended the removal of surcharge on income at upper limit.
Existing slabs
Currently, annual income up to Rs 2.5 lakh is tax free. Taxes are levied at the rate of 5 percent on income from Rs 2.5 lakh to Rs 5 lakh, 20 percent on income up to Rs 5-10 lakh and 30 percent on income above Rs 10 lakh. The government has been giving relief at the lower end through rebates, but these slabs have remained the same for many years. Those with an annual income of more than Rs 50 lakh have to pay an additional surcharge of 10-37 percent depending on their income.
Bibek Debroy, chairman of the Prime Minister's Economic Advisory Council, suggested keeping the tax rate flat, but some objections have been raised. The official said that keeping the flat rate without exemptions could pose a challenge to savings, which has been promoted through tax concessions.
