NEW DELHI: Amid outcry over the growing tax burden on the middle class, the government might reduce income tax rates for individuals earning up to Rs 15 lakh a year, according to a report by Reuters.
Citing two unnamed sources, the international news agency said the move could benefit tens of millions of taxpayers, especially in the urban areas. The sources, who didn’t want to be named, said the government has not decided on the size of any reduction.
A decision would be taken closer to the budget that will be presented in parliament on February 1. The benefit would be available for those taxpayers who have opted for the new tax regime.
Under the new tax regime, there are no exemptions but have lower tax rates. The tax rates range from 5% to 20% for those earnings up to Rs 15 lakh and 30% on earnings above that.
The old tax regime offers several exemptions including deduction on certain investments and expenses. However, under the old tax regime, any earnings above Rs 10 lakh are taxed at 30%. India collects maximum tax from those earnings Rs 10 lakh or more.
Several consumer companies have pointed out a slowdown in consumption, especially in the urban areas. Some have even hinted at the shrinking middle class.
Recently, in a pre-budget meeting with the finance minister, economists had suggested a reduction in income tax to boost consumption.
Private consumption growth has seen a decline in the second quarter to 6%, lower than 7.4% growth recorded during the first quarter.
The consumption slowdown was despite a lower base of 2.6% a year ago. Private consumption contributes 61% of the gross domestic product in real terms.
