The Government is considering reducing income taxes for individuals with an annual income up to Rs15 lakhs.

India is currently considering a reduction in income tax for individuals earning up to ₹15 lakh annually in the upcoming Union Budget scheduled for February 1, 2025. This potential move aims to provide relief to the middle class and stimulate consumption amid an economic slowdown, particularly benefiting urban residents who are facing high living costs and inflation pressures.

Key Details of the Proposal

Target Group: The proposed tax reduction would primarily benefit individuals earning between ₹3 lakh and ₹15 lakh per year. Under the current tax regime, income in this bracket is taxed at rates ranging from 5% to 20%, with earnings above ₹15 lakh attracting a 30% rate

Tax Regimes: Taxpayers have the option to choose between two systems:

  • Old Tax Regime: Allows various exemptions, including those for housing rentals and insurance.
  • New Tax Regime (introduced in 2020): Features lower tax rates but does not permit major exemptions. The new regime has been designed to simplify compliance and is seen as less complicated.

Economic Context

This proposal comes at a time when India is experiencing its slowest economic growth in seven quarters, alongside high food inflation affecting consumer demand across various sectors. By potentially increasing disposable income for the middle class, the government hopes to boost economic activity and consumer spending.

Decision Timeline

While the government has not finalized the specifics of the tax cuts, a decision is expected closer to the budget announcement date. This proposal reflects ongoing political pressure from the middle class, who are increasingly burdened by high taxes and rising living costs.

Category: Consult Value 

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