Income Tax Rate Cut- Review of the current tax structure has revealed that this tax structure is not rational.
Income tax payers may get a big relief in the coming days. The manufacturer may cut income tax rates to rationalize the existing income tax structure. To revive the Indian economy, which is facing the problem of declining consumption, the government may make a big announcement regarding income tax in the upcoming budget.
This claim has been made in a report by Indian Express. Sources have said that the government’s policy makers are in favor of rationalizing the existing income tax structure. For this, more tax exemption can be given to low-income taxpayers. The newly formed government of the BJP-led National Democratic Alliance (NDA) is likely to present the full budget for the financial year 2024-25 by the third week of July.
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Two government officials said the government is likely to prioritise income tax rate cuts for low-income earners over freebies and excessive welfare spending as it focuses on fiscal consolidation. Tax cuts may be a more effective measure to increase disposable income, resulting in increased consumption and boosting economic activity, officials said. People will have more money in their hands, which will lead to increased consumption and an increase in direct and indirect tax revenues. So even if a cut in income tax rates leads to a reduction in revenue, the net impact will be positive.
The tax structure is not rational
An official said that the review of the current tax structure has revealed that the current tax structure is not rational. The tax increase on marginal income is very high. In the new tax regime, the first slab of 5% starts from an income of Rs 3 lakh. When the income reaches Rs 15 lakh, that is, increases five times, the marginal tax rate increases from 5% to 30%. That is, the rate of income tax increases six times. This increase rate is very high.
It is important to increase consumption
An official said that it is important to boost consumption to revive demand. It plays a very central role in restarting the investment cycle and reviving private capital expenditure, especially in consumer-centric sectors. This can also increase GST collection. Another official said, “This way (by rationalizing income tax) you will unlock consumption. There will be more disposable income, which means more consumption, more economic activities, more GST collection.”
