Budget 2024 wishlist: Simplify tax slabs for middle class, boost manufacturing sector, PHDCCI to FM

Union Budget 2024: Finance Minister Nirmala Sithraman will be presenting the full Budget 2024 next month. Experts and industry bodies have suggested that the government should consider reducing income tax rates for specific groups of individuals. 

Industry body PHDCCI in its interaction with FM Sitharaman on Thursday suggested the Centre to bolster manufacturing sector, support consumption demand and provide relief to middle-income group with rationalisation of tax slabs.

It also suggested 10 action points, including manufacturing boost, PLI expansion, rationalisation of income tax, status quo on corporate tax, and further ease of doing business.

“The middle class must be spared from the 30 per cent tax rate and this rate must be applicable only to those with taxable income above Rs. 40 lakh, this will support consumption demand in this country," said Sanjeev Agrawal, president of the PHD Chamber of Commerce and Industry.

Here are the action points:

1. Further reforms to enhance the manufacturing share in GDP to 25% by 2030. 2. Expand the PLI scheme beyond the 14 sectors with addition of more labour intensive sectors. 3. Change in Classification Norms of MSMEs for NPAs from the 90 days limit to 180 days. 4. Rationalization of direct taxes for the middle class. 5. Focus more on tier 2 and 3 cities with state of the art infrastructure and smart villages with adequate facilitation of public utilities. 6. Status quo on the corporate tax rates. 7. Strengthen University-Industry Linkages to enhance R&D activity in the country. 8. Reduce costs of doing business including costs of capital, costs of power, costs of logistics, costs of land and costs of compliances. 9. Implement the four labour codes across the states to enhance the competitiveness of the industry. 10. Strengthen supply chains and address the shortages in key food items to mitigate inflationary pressures.

Besides, the industry body recommended status quo on the corporate tax rate at 22 percent for existing companies and 15 percent for new manufacturing companies incorporated after October 1, 2019, to enhance the manufacturing share in GDP.

Before this, Mukul Bagla, Chair of the Direct Taxes Committee at PHDCCI, had recommended taxpayers earning Rs 40 lakh and above to be taxed at 30%. At present, the threshold is Rs 15 lakh. 

“The middle class is currently taxed at a rate of 30%, leaving them with little disposable income for savings and other needs. We suggested that the 30% tax slab should apply only to incomes above Rs 40 lakhs”, said Bagla.

Earlier, Reuters reported that the Modi 3.0 government might give some relief to taxpayers in the lowest income group. 

There is also a buzz that the Centre is planning to raise the income threshold before any tax is levied from Rs 3 lakh to Rs 5 lakh in the upcoming budget. This change will apply only to those filing returns under the new tax regime. “In the past, few tax breaks/ incentives have been extended to individual taxpayers except under the new tax regime. Hence, many believe that this year, the government should at least raise the exemption slab rates for individuals to about Rs 5 lakh," said Aarti Raote, Partner, Deloitte India.