1. As India awaits Budget for tax relief, Donald Trump leads with his own plan for Americans

As India awaits Budget for tax relief, Donald Trump leads with his own plan for Americans

While Indians are awaiting tax relief in the upcoming Budget 2017, US President Donald Trump is also ready with his own plan to introduce similar changes in American tax code.

By: | Updated: January 30, 2017 12:53 PM
union budget 2017, union budget, budget 2017, budget india, budget jaitley, jaitley budget, donald trump, trump tax code, trump tax, tax trump, narendra modi, modi trump, trump modi Tax reform and revising the income tax brackets are some of the most ambitious agendas Prime Minister Narendra Modi and US President Donald Trump for their countries. (Source: PTI/Reuters).

At a time when millions of Indians are curiously awaiting tax relief and simplification of taxation process in the upcoming Budget to be announced on February 1, US President Donald Trump is also ready with his own plan to introduce similar changes in American tax code for his country’s citizens.

Tax reform and raising the income tax bracket are some of the most ambitious agendas of the government led by Prime Minister Narendra Modi as well as the US President.

After demonetisation, it is expected that Modi government may increase the income tax slab up to Rs 4 lakh from the existing Rs 2.5 lakh per year. Currently, income up to Rs 2.5 lakh is exempt from tax, income from Rs 250,001 to Rs 5,00,000 is taxed at 10%, from Rs 5,00,001 to Rs 10,00,000 at 20% and above Rs 10 lakh at 30%.

Modi government’s economic philosophy envisions the abolition of income tax for citizens. It is believed that income tax collection doesn’t add much to India’s total GDP. While this may not be possible in the short run, the government can at least raise the tax slab to save millions of people from the burden of paying income tax.

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Interestingly, US President Trump has a similar vision that will make “America Great Again”. Trump Tax Plan includes tax relief for middle-class Americans and simplification of the tax code.

At present, there are seven tax slabs for American citizens and they pay taxes ranging from 10 to 39.6 per cent. Ten per cent tax is charged from single people earning $0-$9325 or from the head of household earning $0-13,350. For married people, filing tax jointly, 10% is charged from those reporting an earning of $18,650. The tax charges increase up to 39.6 % as per the tax slabs.

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President Trump wants to do away with the seven tax brackets and keep just four — 0%, 10%, 20% and 25%. Further, he has proposed to keep everyone earning less than $25,000 out of the tax net. Trump Tax Plan, which was part of US President’s campaign promises, also includes a proposal to end death tax. “This plan simplifies the tax code by taking nearly 50% of current filers off the income tax rolls entirely and reducing the number of tax brackets from seven to four for everyone else,” says the proposal.

Trump may start the procedure to convert his proposal into law soon. Meanwhile, in India people will closely watch Finance Minister Arun Jaitley’s Budget announcement as it may have a bearing on their pockets.

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