look news india
New Delhi. Income tax payers may get a big relief in the coming days. To rationalize the existing income tax structure, manufacturers can cut income tax rates. To revive the Indian economy, which is facing the problem of declining consumption, the government can make a big announcement regarding income tax in the upcoming budget. This claim has been made in a report by Indian Express. It has been quoted from sources that the government's policy makers are in favor of rationalizing the existing income tax structure. For this, more tax exemption can be given to low-income taxpayers. The newly formed government of the BJP-led National Democratic Alliance (NDA) can present the full budget for the financial year 2024-25 by the third week of July.
Two government officials said there is a possibility that the government may prioritise income tax rate cuts for low-income earners over freebies and excessive welfare spending due to its focus on fiscal consolidation. Tax cuts may be a more effective measure to increase disposable income, resulting in higher consumption and boosting economic activity, officials said. People will have more money in their hands, which will lead to higher consumption and a rise in direct and indirect tax revenues. So even if a cut in income tax rates reduces revenue, the net impact will be positive.
The tax structure is not rational
An official said that the review of the current tax structure has revealed that the current tax structure is not rational. The tax increase on marginal income is very high. In the new tax system, the first slab of 5 percent starts from an income of Rs 3 lakh. When the income reaches Rs 15 lakh, that is, increases five times, the marginal tax rate increases from 5 percent to 30 percent. That is, the income tax rate increases six times. This increase rate is very high.
Increasing consumption is important
One official said that boosting consumption is important to revive demand. It plays a very important role in restarting the investment cycle and reviving private capital expenditure, especially in consumer-centric sectors. This can also increase GST collections. Another official said, “This way (by rationalising income tax) you will unlock consumption. There will be more disposable income, which means more consumption, more economic activities, more GST collections.”
