NEW DELHI: The government is considering a proposal for income tax relief in the upcoming Budget, aiming to raise the threshold and restructure tax slabs without introducing concessions in the new tax regime. Analysts and experts have long advocated for a reevaluation of income tax rates, especially in light of weak demand and the need to ease the burden on the middle class. Last year, Finance Minister Nirmala Sitharaman increased the standard deduction for salaried individuals to Rs 75,000 and revised the tax slabs, resulting in a gain of Rs 17,500 for taxpayers.
As the Budget approaches this year, discussions within the government have revolved around further raising the standard deduction to provide relief to all taxpayers. Additionally, there is a growing demand to reduce tax liabilities across all income segments, including for higher earners, in order to stimulate spending and bolster the economy. Suggestions have been made to enhance concessions for expenditures on health insurance and pension, essential for individuals in a country like India where self-reliance is crucial.
Experts have proposed significant changes in the tax treatment of interest income, with potential revenue losses ranging from Rs 16,000 crore to Rs 1.2 lakh crore depending on various scenarios. By lowering the peak tax rate to 25% for individuals earning Rs 15 lakh or more, along with exemptions for health insurance and National Pension System (NPS) contributions, the government could face a substantial revenue hit.
Furthermore, there have been calls to extend benefits for home loans under the new tax regime. Government officials, however, are cautious about reintroducing concessions and exemptions, as it may lead to a regression in the new tax structure. The emphasis remains on providing taxpayers with the flexibility to choose the most advantageous option for their financial situation.
In the midst of these deliberations, the government is navigating a delicate balance between stimulating economic growth and maintaining fiscal stability. The outcome of these proposed changes in income tax rates and exemptions will undoubtedly have far-reaching implications for taxpayers across the country. As the Budget unfolds on Saturday, all eyes will be on the government’s decision on income tax relief measures and their impact on the economy.
