Prime Minister Narendra Modi-led NDA II government is mulling to cut the personal income tax rates to boost demand and revive investment in the economy.
With the festive season around the corner, the Centre is considering leaving more cash in the hands of people by rationalising individual income tax rates. Central Board of Direct Taxes (CBDT) member Akhilesh Ranjan-led panel has been tasked by the government to make the Income Tax Act simpler, with focus on easing the tax and compliance burden on individuals, simplifying tax brackets to provide relief to middle-income taxpayers, and doing away with excess surcharges that add to the tax burden.
The draft legislation on the new Direct Tax Code (DTC) was submitted to Finance Minister Nirmala Sitharaman on August 19. The contents of the report have not been made public yet. A FinMin source earlier told India Today that the panel had recommended introducing a 10 per cent tax rate slab for annual income between Rs 2.5 lakh and Rs 10 lakh followed by a 20 per cent slab for the Rs 10-20 lakh income bracket and a 30 per cent, or higher, slab for higher income levels.
If true, this will come as a major relief for those in the Rs 5-8 lakh slab, who have been paying 20 per cent tax since 2010-11. The upper threshold for this rate was subsequently pushed up to Rs 10 lakh for FY13.Also Read: 10 ways in which new income tax rules will impact you
The lower middle class already had much to cheer in Budget 2017 when late former finance minister Arun Jaitley halved the personal income tax in the Rs 2.5-5 lakh bracket to 5 per cent and again in the Interim Budget 2019, thanks to the full tax rebate offered to individuals with taxable annual income up to Rs 5 lakh. Those with a total annual income of over Rs 10 lakh currently fall in the 30 per cent tax slab. The buzz is that those earning up to Rs 55 lakh may also get major tax relief.
Sitharaman recently had announced a relaxation in the corporate tax rates for domestic companies and new manufacturing domestic companies. As per the tax reforms, domestic companies will be taxed at 25.17 per cent, whereas new manufacturing firms will be taxed at 17 per cent.
Both tax rates include all the surcharges and cess and will be applicable from the ongoing financial year. The decision is meant to increase liquidity at the companies' disposal and encourage foreign investment, especially in the manufacturing segment.