Government may slightly tweak personal income tax slabs or offer a lower flat tax rate in the upcoming budget as it looks to revive the slowing economy.
There are reports which indicate that government is looking to incentivise individual taxpayers to put money in the hands of people in a bid to boost demand.
A finance ministry source, who spoke to India Today on condition of anonymity, said the government is “actively considering” the prospect of tweaking income tax slabs and help increase the disposable income of individual taxpayers.
While no major personal income tax changes are expected in budget, the source said that the government is planning some incremental changes in income tax slabs.
Though there is no confirmation on how it plans to rationalise tax slabs, the finance ministry is also expected to offer higher full tax rebate for individual taxpayers. The full tax rebate for income up to Rs 5 lakh can be enhanced to Rs 6.5 lakh.
It could also increase the standard deduction amount of Rs 50,000 by Rs 10,000 in lieu of specific allowances offered to salaried individuals.
In the present income tax structure, an individual earning up to Rs 2.5 lakh is exempt from paying taxes while a five per cent tax is applicable on incomes between Rs 2.5 lakh and Rs 5 lakh; a higher 20 per cent slab is in place for individuals who earn between Rs 5 lakh and Rs 10 lakh.
A 30 per cent tax rate is applicable for those earning above Rs 10 lakh. An additional surcharge is also levied by the government on people with income above Rs 50 lakh.