Synopsis: Industry associations, including CII, have proposed marginal tax relief for individuals with incomes up to Rs. 20 lakh to boost consumption demand in pre-budget discussions with the Revenue Secretary. Finance Minister Nirmala Sitharaman is reportedly considering significant tax cuts for lower-income earners for the first time in seven years, as part of a $6 billion consumption-boosting package.
Industry associations such as CII, in pre-budget discussions with the Revenue Secretary, have proposed marginal relief in income tax for those with taxable income up to Rs. 20 lakh to boost consumption demand.
Finance Minister Nirmala Sitharaman is reportedly considering significant tax cuts for India's lower-income earners for the first time in seven years.
These tax cuts, part of a $6 billion consumption-boosting package, are expected in the upcoming Budget, according to a Bloomberg report.
The move is expected to benefit individuals earning between Rs. 5 lakh and Rs. 15 lakh, who currently face tax rates of 5%-20%.
The report also mentioned that the Centre might introduce a new tax bracket.
Details are still being discussed, with a final decision anticipated closer to the Budget announcement on July 18.
Despite potential revenue losses, the government remains committed to maintaining its fiscal deficit target of 5.1% of GDP for the current financial year.
Discussions also include raising the annual cash payment to small farmers from Rs. 6,000 to Rs. 8,000, increasing payments under the minimum job guarantee program, and expanding financial support for women farmers.
Finance Minister Nirmala Sitharaman is conducting pre-budget consultations with stakeholders, including economists, trade unions, and industry chambers.
Local media suggests the budget announcement might be on July 22.
In discussions with the Revenue Secretary, industry associations like CII have suggested providing marginal income tax relief for those with taxable income up to Rs. 20 lakh to boost consumption demand.
A significant concern for individual taxpayers has been the rising tax collections from them, which in recent years have exceeded corporate income tax collections.
In 2023-24, net corporate tax collections were Rs. 9.11 lakh crore, while net personal income tax collections were Rs. 10.44 lakh crore.
In 2022-23, corporate tax collections stood at Rs. 8.25 lakh crore, and personal tax collections were Rs. 8.33 lakh crore.
Experts note that, while some tax relief for individuals is warranted, companies typically pay taxes at much higher rates than individuals.
Neeraj Agarwala, Partner at Nangia Andersen India, pointed out that corporations, which file only 1.41% of income tax returns, declare an average of 30% of the total gross income and account for 48% of total tax collection.
In contrast, individuals file about 94% of returns, declare 65% of the total gross income, but have an aggregate tax liability of only 42%.
Despite similar tax collection figures, corporations contribute at an average tax rate of 24% of the total gross income, while individuals are taxed at an average rate of 10%.
From an individual taxpayer's perspective, there is frustration over limited tax deductions and confusion regarding the tax regime with marginal reliefs.
Expectations from the Union Budget include modern expense-related tax deductions and homeowner relief.
While lower tax rates may ease some burden on taxpayers, the focus should be on providing necessary deductions, he added.
In conclusion, the upcoming 2024 Budget discussions are centered around providing tax relief to lower-income earners and boosting consumption demand through a comprehensive package.
Industry associations, like CII, have advocated for marginal tax relief for those with incomes up to Rs. 20 lakh, while Finance Minister Nirmala Sitharaman is considering significant tax cuts for the first time in seven years.
These measures are part of a broader $6 billion consumption-boosting initiative.
Despite the potential revenue loss, the government aims to maintain its fiscal deficit target of 5.1% of GDP.
Additionally, proposed increases in financial support for small farmers and enhancements to the minimum job guarantee program highlight the government's commitment to addressing the needs of various economic segments.
Stakeholders, including economists and trade unions, are actively involved in the pre-budget consultations, with final decisions expected by the anticipated Budget announcement on July 18.
