Govt Plans Rejig in Personal Tax Slabs to Boost Spending

The Indian government is thinking of rationalizing the personal income tax rates for increasing disposable income, especially for the middle class. This move will drive consumption and growth. This all was informed by two government officials. This move is a resultant of the rates of corporate tax to boost the sentiment and investment and make the Indian industry even more competitive.

Read more
Best Tax Saving Plans
  • High Returns

    Get Returns as high as 15%*
  • Zero Capital Gains tax

    unlike 10% in Mutual Funds
  • Save upto Rs 46,800

    in Tax under section 80 C

*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply

Get Instant Tax Receipts
Save upto ₹46,800 in Taxes Under Section 80C
View Plans
Please wait. We Are Processing..
Plans available only for people of Indian origin By clicking on "View Plans" you agree to our Privacy Policy and Terms of use #For a 55 year on investment of 20Lacs #Discount offered by insurance company Tax benefit is subject to changes in tax laws
Get Updates on WhatsApp

The officers of government are working to simplify the archaic laws of the income tax and rationalize the rate of tax in line with the recommendations of the task force over Direct Tax Code (DTC) that has submitted its reports on 2019 August. The main objective of doing so is to enhance compliance, make taxpayers' lives easy, and expand the tax base.

Further, the officials said that according to the impact of this decision on the revenue, different scenarios will be considered. However, the idea of the same is to provide at least 5% points benefiting to every taxpayer.

One option can be to introduce a slab of 10% for the people who are having taxable income that ranges between Rs.5Lakh to Rs.10Lakh. Presently, this slab attracts a tax rate of 20%. There are as well some options to remove the cess, many tax exemptions, and surcharge and hence reduce the rate of tax of the highest slab approximately from 30% to 25% as per the officials.

Presently, the taxable income that is between Rs.3Lakh to Rs.5Lakh attracts a rate of 5%. However, a 20% tax rate is imposed on the second slab, wherein the taxable income is between Rs.5Lakh to Rs.10Lakh and 30% over the income that is more than Rs.10Lakh. The income that is up to Rs.2.5Lakh is tax-free.  

The main job of the officials is to present different options without or with the existing exemptions and present this before the competent authority takes a final decision and finalizes the announcement timings.

As per the two officers, the task force’s recommendations on the Direct Tax Code will be helpful. The government has constituted the task force on the Direct Tax Code in November 2017 for reviewing the present income tax legislation and for drafting a new law of direct tax in harmony with the economic requirements of the country.

The experts expect some announcement related to this before Diwali, so that the demand can be created instantly and which can boost the consumption and resultantly its growth. The economic growth of India has slowed down in six years and in the June quarter, it was 5% low, which is the fifth quarterly straight decline in the growth.

The senior director of Deloitte India said that the translation of the reduction in personal income tax for pushing the demand and its consumption is fast because it leaves some extra money in the taxpayer's pocket. The government will have to weigh properly the figures of its revenue and aspects of fiscal deficit.

Naveen Wadhwa, Taxmann’s DGM, explained the requirement of this move by pointing out the reduction in corporate tax will help manufacture companies; however, it may not help boost the demands of consumers. When more income is available to the taxpayers, then it will motivate consumption. In this way, the government should consider reducing the rate of personal tax.

The Finance Minister, on 20th September, announced the slashing of the rates of corporate taxes for the domestic manufacturers from thirty percent to twenty-two percent. On the other hand, for new manufacturing companies, the IT rate was reduced to 25% to 15% without any claimed exemptions.

SR Patnaik, head taxation and partner of Cyril Amarchand Mangaldas said that the government has taken many measures for boosting the economy which also includes recent announcements related to slashing in the rates of corporate tax. He further said that to provide confidence to the individual taxpayers, the rationalization of personal tax rates will be a good idea and which may create an optimistic environment to provide the required stimulus to the economy.

As per Wadhwa, it as well makes complete sense to maintain parity between corporate and individual taxpayers according to the rates.

Helpful Resources: Online Income Tax Calculator

Tax Saving Investment
Save Tax Under Section 80C

Income Tax articles

Recent Articles
Popular Articles
Income Tax Above 10 Lakh

10 Jun 2022

Every year on the 1st of February, the Government of India...
Read more
Investment Declaration with Form 12BB

08 Jun 2022

Tax planning is vital for salaried individuals to streamline...
Read more
NPS Tax Savings

08 Jun 2022

NPS or National Pension Scheme is a voluntary pension plan...
Read more
How is Short-Term Capital Gains Tax Calculated on Shares?

08 Jun 2022

Any property or security in your name is a capital asset for...
Read more
How to Save TDS on Interest with Form 15G and 15H?

08 Jun 2022

Fixed deposits are the safest investment vehicles for most...
Read more
Tax Saving Investments
Tax Saving Investments are an integral part of one’s life as they offer tax deductions under section 80C or...
Read more
Income Tax Above 5 Lakh
Income tax is the tax levied on the income earned by an individual through any source and hence is taxable in the...
Read more
Cost Inflation Index
We all have read in the school books, never took it seriously as a child, and now it has become the most...
Read more
Gratuity Eligibility Before and After Completion of 5 Years
An employee is a person who is hired by an organization to work in a specific field that they have expertise in...
Read more
SBI PPF Calculator
Public Provident Fund or PPF is a complete Government-backed investment scheme offered to all individuals, both...
Read more
Download the Policybazaar app
to manage all your insurance needs.