The Modi government has received multiple suggestions and recommendations from various organisations ahead of the Union Budget 2019 on February 1. The Federation of Indian Chambers of Commerce & Industry (FICCI) also suggested that the highest personal income tax of 30% be levied only on individuals who earn more than Rs 20 lakh per annum. Currently, the highest tax slab of 30% is payable by individuals who earn more than Rs 10 lakh annually.
Individuals earning less than Rs 2.5 lakh are not required to pay tax, while individuals earning from Rs 2.5 lakh to Rs 5 lakh are required to pay 5% tax along with cess. Individuals who earn more than Rs 5 lakh up to Rs 10 lakh pay 20%, along with cess, while the highest slab of 30% is paid by individuals earning up to Rs 10 lakh.
The Modi-led BJP government that is eyeing a second term in power is likely to announce multiple populist measures to secure votes in the upcoming Lok Sabha elections. The significant vote bank as well as the biggest chunk of taxpayers is the middle class. Hence, it is expected that the Modi government will announce measures to woo the middle class.
However, announcing a change in the tax brackets might not be very seamless due to the upcoming Direct Tax Code Report that will reportedly try to bring more assessees into the tax net, make the system more equitable for different classes of taxpayers, make businesses more competitive by lowering the corporate tax rate, and phase out the remaining tax exemptions that lead to litigation. The Direct Tax Code Report is scheduled to release on February 28.
(Edited by Anwesha Madhukalya)