The government is considering rationalising personal income tax rates in a move that will result in the increase of disposable incomes.
This Diwali may bring prosperity for many as the Narendra Modi-led government is considering to cut the personal income tax rates. As the next step in the continued efforts to boost demand and investment in the economy, the government is planning to leave more cash in the hands of the people by reducing the taxman’s share. The government is considering rationalising personal income tax rates, the Hindustan Times reported citing two unidentified officials. The move will result in the increase of disposable incomes, especially among the middle class, and hopefully drive consumption and growth, the report said.
The move comes close on the heels of the government’s announcement to cut the corporate income tax rates, which would hurt the government revenue by as much as Rs 1.45 lakh crores. Government officials have been working on simplifying income-tax laws and rationalising tax rates in line with recommendations of the task force on the Direct Tax Code, which submitted its report on August 19. The objective of this recommendation was to enhance compliance, expand the tax base and to make lives of the taxpayer easy.
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The government officials are going over multiple options in order to simplify income-tax laws and rationalise tax rates, among which, one of the options is to introduce a 10 per cent slab for people having taxable income between Rs 5 lakh and Rs 10 lakh. Currently, this slab attracts a 20 per cent tax rate, the report said. Speculations are that the government may also remove levies such as cess and surcharge, and also several tax exemptions.
The report also said that the idea this time is to give at least a 5 percentage point benefit to every taxpayer, according to the sources. Before this, in Finance Minister Nirmala Sitharaman’s maiden Union Budger 2019, the government announced a full rebate on taxable income up to Rs 5 lakh per year.