Budget 2020 India expectations Income tax slabs: The central government should levy the peak income tax rate of 30 per cent on individual taxpayers earning over 20 lakh per annum, recommends the Federation of Indian Chambers of Commerce & Industry (FICCI). Currently, an individual earning over Rs 10 lakh per annum needs to pay 30 per cent tax rate. Citing that the income level on which peak income tax rate is applied in other countries is much higher than that in India, the industry body has said that there is a need to raise the income level on which the peak income tax rate would be applied. This would make income tax rates compatible with the international standards, FICCI stated in its ‘Focus areas for Union Budget 2020-21 – Taxation Issues’.
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In its pre-Budget 2020-21 expectations, FICCI has also recommended revised tax slabs for individual taxpayers. The industry body has suggested that the central government should not impose income tax on individuals earning up to Rs 5 lakh per annum. A proposed 10 per cent income tax rate should be levied on individuals earning between Rs 5 to Rs 10 lakh per annum. A proposed 20 per cent income tax rate should be levied on individuals earning between Rs 10 to Rs 20 lakh per annum. The proposed peak income tax rate of 30 per cent should be applicable on individual earning over Rs 20 lakh per annum, FICCI said.
Currently, income tax slabs in India are – individuals earning up to Rs 2.5 lakh per annum do not require to pay income tax. Individuals earning between Rs 2.5 lakh to Rs 5 lakh per annum need to pay 5 per cent income tax. Individuals earning between Rs 5 lakh to Rs 10 lakh per annum need to pay 20 per cent of income tax. The peak income tax rate of 30 per cent is applicable to Individuals earning over Rs 10 lakh per annum.
FICCI stated that no changes were made to the existing slab of income and tax rates in Budget 2019. However, under Finance (No. 1) Act, 2019, tax rebate was enhanced to Rs 12,500 that has effectively translated into the payment of NIL tax by individuals earning up to Rs 5 lakh per annum, FICCI stated. The industry body has stated that given the current economic scenario in India, additional net disposable income resulting from a reduction in personal income tax rates, could enhance consumption and spur overall demand for goods and services.