Budget likely to cut personal income tax rates to boost consumption

Mumbai: In view of high inflation, unemployment and falling income, the Finance Minister may cut the income tax rate in the budget to be presented in July for the current financial year. The Finance Ministry plans to increase consumption by reducing the personal income tax rate.

India's economic growth rate was 8.20 percent in the last financial year but the consumption growth rate was half of it. Private final consumption expenditure grew by 4 percent in the last financial year.

The Narendra Modi government, which has come to power for the third time at the Centre, may present the first budget of its new term in July.

Generally, putting more money in the hands of taxpayers leads to an increase in consumption. Finance Ministry sources said that individual taxpayers with income of more than Rs 10 lakh are likely to get relief in income tax.

The government plans to limit the fiscal deficit to 5.10 percent of GDP at the end of the current financial year. An analyst said that there is no possibility of major relief from fiscal deficit risks in the budget.

The balance sheet of the Central Government is currently strong as a result of robust revenue from the Goods and Services Tax (GST) and huge dividends received from the Reserve Bank.

Finance Minister Nirmala Sitharaman may hold a meeting with farmer organisations and agriculture sector experts this week as part of pre-budget discussions.