As the Budget approaches, there is growing anticipation for relief in income tax rates as the middle class taxpayer struggles to find her way through rising prices. In the run-up to Budget 2025, the government is aiming to keep the new tax regime without additional concessions, while considering adjustments to thresholds and slab structures, ToI reported on January 27.
Income tax rates are typically among the last elements finalised in the Budget process. Leading up to this year's Budget, which will be presented on Saturday, various stakeholders, including companies and economists, have argued for a reworking of tax rates to alleviate the burden on taxpayers, particularly the middle class, in light of sluggish demand. Last year, Finance Minister Nirmala Sitharaman increased the standard deduction for salaried individuals to Rs 75,000 and revised tax slabs, cla ..
In anticipation of the upcoming Budget, discussions within the government have centered on further increasing the standard deduction. This move is expected to provide significant relief to all taxpayers. Additionally, there is growing pressure to allow middle-class consumers to retain more income, leading to proposals for lowering tax liabilities across various slabs, including higher income brackets.
Calls for increased concessions on health and pension spending
While the government focuses on refining rates in the new tax regime, there are also proposals for enhancing concessions for essential expenditures such as health insurance and pension contributions. This is especially pertinent in India, where individuals, other than government employees, often lack safety nets. A report from the State Bank of India (SBI) advocates for health insurance exemptions of up to Rs 50,000 and N ..
Potential revenue implications of tax rate changes
Should the government choose to retain the peak tax rate at 30% while introducing a 15% levy for individuals with taxable incomes between Rs 10-15 lakh (as opposed to the current 20% for those earning Rs 12-15 lakh), it could result in a revenue loss ranging from Rs 16,000 crore to Rs 50,000 crore annually. Furthermore, if the peak rate is reduced from 30% to 25% for those earning Rs 15 lakh or more, along with the proposed exemption ..
In a third scenario, where both the peak rate is cut to 25% and a 15% levy is applied for those earning between Rs 10-15 lakh, alongside the health and NPS exemptions, the projected revenue loss could range from Rs 85,000 crore to Rs 1.2 lakh crore.
Official stance on concessions and exemptions
Despite these discussions, government officials remain cautious about introducing concessions and exemptions, as they fear it may lead the new tax regime to gradually resemble the previous one. Nonetheless, they suggest that offering taxpayers the option to choose between regimes could be beneficial, allowing individuals to select the approach that best serves their financial interests.
Source Name : Economic Times