Budget 2024 income tax expectations: The Modi government is mulling over the possibility of reducing personal tax rates for specific groups of individuals, according to two government sources who spoke to Reuters. This move has the potential to stimulate consumption in India, which is the third-largest economy in Asia.
The sources, who requested anonymity due to the confidential nature of budget discussions, indicated that the plan might be unveiled in July when Finance Minister Nirmala Sitharaman presents the first Union Budget following the Modi 3.0 government.
Budget 2024 Income Tax Expectations
- The sources told Reuters that a reduction in personal tax could boost consumption and increase savings for the middle class. The first source mentioned that individuals earning over Rs 15 lakh ($17,960.42) annually, up to a certain undetermined amount, may receive some tax relief.
- The changes could be made to the new income tax regime introduced in 2020, where annual income up to Rs 15 lakh is taxed at rates between 5% and 20%, while earnings over Rs 15 lakh are taxed at 30%.
- The second source pointed out that the personal tax rate increases six-fold when an individual’s income rises from Rs 300,000 to Rs 15 lakh, which they described as “quite steep.”
- The government may also consider lowering personal tax rates for annual incomes of Rs 10 lakh, according to the first source. They added that a new threshold is being discussed for income taxed at the highest rate of 30% under the old tax system.
- The second source noted that any loss of tax income to the government through tax cuts could be partially offset by increased consumption from this category of income earners.
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Although the Indian economy expanded at an impressive 8.2% in 2023-24, consumption growth has been only half that rate. During his claim to form the National Democratic Alliance-led government, Prime Minister Modi had stated that his administration would prioritize increasing middle-class savings and enhancing their quality of life, the Reuters report said.