The Union government is considering increasing the personal income tax threshold in July 5 budget, according to people familiar with the matter, as authorities seek to kickstart consumption in the economy.
Finance minister Nirmala Sitharaman may raise the tax exemption limit for working-age individuals to Rs 300,000 of their annual income, up from the current Rs 250,000, the people said, asking not to be identified as they aren’t authorized to speak publicly about the proposals. The tax measures haven’t been finalized yet.
Any tax exemptions will add stimulus to an economy that’s slowed sharply this year, with growth reaching a five-year low of 5.8% in the first three months of the year.
The proposed tax move would put at least Rs 2,500 more in the hands of each of India’s 5 crore taxpayers. It could also add to pressure on the budget deficit, which is pegged at 3.4% of gross domestic product for the current fiscal year that began on April 1.
The finance ministry is also looking at raising the tax exemption limit for savings and investments made under the so-called Section 80C of the Income Tax law, the people said. The ceiling is currently set at Rs 150,000.
DS Malik, a spokesman for the finance ministry, declined to comment as budget discussions are confidential. Sitharaman is due to present the budget in India’s lower house of parliament on July 5.