Big income tax cuts on cards as Diwali gift: report
03 October 2019
The Narendra Modi-led government is considering a rationalisation of personal income tax rates, in a move that will leave taxpayers with higher disposable incomes this Diwali, say reports.
A downward revision in personal income tax rates is the next logical step in the government’s efforts to boost demand and investment in the economy. Coming after a major reduction in corporate tax rates, the move will leave more cash in the hands of the investor and the consumer, the Hindustan Times reported citing two unidentified officials.
However, the slashing of direct tax rates will leave the exchequer poorer. The cut in corporate tax rates would make a Rs1.45 crore dent in government revenue while a reduction in personal income tax rates could make an equal or more reduction in government’s tax revenue.
Government officials have been working on simplifying income-tax laws and rationalising tax rates in line with recommendations of the task force on the Direct Tax Code, which submitted its report on 19 August. The objective is to enhance compliance, expand tax base and to make lives of the taxpayer easy.
Government officials are going over multiple options in order to simplify income-tax laws and rationalise tax rates.
One option is to introduce a 10 per cent slab for people having taxable income between Rs5 lakh and Rs10 lakh. Currently, this slab attracts a 20 per cent tax rate, the report said, adding that the government may also remove levies such as cess and surcharge, as also several tax exemptions.
The reworked tax rate is expected to give at least a 5 percentage point benefit to every taxpayer, according to sources.
Finance minister Nirmala Sitharaman’s maiden Union Budget 2019 has already announced complete tax exemption on income up to Rs5 lakh per year.