Possibility of getting big relief in
income tax, these changes can happen in the tax rate.
New Delhi:
Finance Minister Nirmala Sitharaman has recently indicated a cut in Income Tax.
According to analysts, the government may announce relief on the income tax
front in the budget of 2020-21. This will directly benefit the millions of salaried
people of the country, who are expecting relief from the government in this
phase of economic slowdown, as the central government has given a big relief to
the industry of the country through a huge reduction in corporate tax in
September this year.
Sitharaman, while
addressing a program in the national capital last week, said that the
government is considering several measures including reduction in personal
income tax to increase consumption in the country. However, with regard to
income tax exemption, he said to wait till the upcoming budget. The upcoming
budget will be presented in February next year. In such a situation, let us
know how much exemption can the middle class of the country expect in income
tax.
It is possible to announce a big rebate in Income Tax
Brinda Jagirdar, the
former Chief Economist of SBI, said that both consumption and investment need
to be increased to get the economy out of sluggishness. The government has
given relief to companies through the Corporate Tax cut, but to bring back
middle class confidence, the Individual Income Tax should be reduced. The
Jagirdar said that after the implementation of GST, the government cannot do
much about Indirect Tax, but there is still some scope for Direct Tax.
He said, "To
give money in the hands of the middle class and to increase the consumption, we
can announce a big rebate related to Income Tax in the upcoming budget. This
rebate can be available both in income tax slab and rate.
Reduction in tax rate may increase revenue collection
Tax expert Balwant
Jain cited the 'Laffer Curve' principle in this regard. This principle shows
the relation of tax rate and recovery of government revenue. He said that by
reducing income tax, people's purchasing power will increase. This will
increase revenue in the form of Indirect Tax.
He advocated reducing
the rate of income tax from 20 per cent to 10 per cent on income of Rs 5 lakh
to Rs 10 lakh. Along with this, he advocated taxing 20 percent on annual income
up to 10-25 percent. At the same time, Jain said that he will be charged 30%
tax on income ranging from Rs 25 lakh to Rs 1 crore. According to Jain, the
government should tax up to 40 per cent on annual personal income of more than
Rs 1 crore.
Overall package is needed
According to DK
Joshi, Chief Economist of rating agency CRISIL, the government will have to
take many steps to increase demand in the country and bring the economy out of
slowdown. He said that a reduction in Income Tax could be one of them. Finance
Minister Sitharaman also said that the government is thinking of several
measures including tax cuts to boost economic growth.
"An overall
package is needed to strengthen the economy," Joshi said in response to a
question. For this, the spending power of the people needs to be increased. The
government will have to pay money in the hands of the lowest income people.
This amount can be given through schemes like MNREGA. Income tax reduction can
also be a measure and it will be more helpful in increasing demand than the
decision to cut corporate tax.
These things of
reduction in personal income tax are happening at a time when the pace of
economic growth of the country has come down to more than six years in the
second quarter of the current financial year. The country's GDP growth rate was
4.5 percent between July and September. The government has taken several steps
to speed up the country's economy so far this year. Corporate tax cuts were the
biggest decision taken in this direction. At the same time, the RBI has also
reduced the repo rate by 1.35 percent to burden the EMI of the people.
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