In a bid to relieve the middle class, the central government may cut income tax on individuals earning up to Rs 1.5 crore a year in the upcoming fiscal year 2025-26, Reuters reported. and cited two official statements. This action is aimed at increasing consumption in the economy in a recession.
“People from various sources, who did not wish to be named because they were not authorized to speak to the media, said the nature of any discounts had not been decided. The decision will be made near the budget on February 1,” Reuters quoted sources as saying.
Leading economists have also urged Prime Minister Narendra Modi to cut income tax rates to reduce the burden on the public. PM Modi on Tuesday met eminent economists and local experts at the NITI Aayog to hear their views and suggestions on the upcoming Budget.
During the meeting, economists and local experts reportedly asked the government to cut income tax rates, rationalize customs duties and come up with subsidy measures a exports do not come in the upcoming budget.
Union Finance Minister Nirmala Sitharaman is scheduled to present the 2025-26 budget in the Lok Sabha on January 1, 2025.
FM Nirmala Sitharaman announced a comprehensive review of the Income Tax Act in the last Budget 2024-25 in July. Later, a monitoring committee headed by Chief Commissioner of Income Tax VK Gupta was constituted. The panel report is expected before the 2025-26 budget.
But according to a Moneycontrol report quoting an official, “The new I-T Act, which is unlikely to be presented in the next budget, will take more than a year to come into effect”.
“It could take more than a year. The system must adapt to changes. Since this will be a completely new Act, it will be much more complicated. All new rules and documentation needs to be activated, tested and the system integrated, and that will take time,” a government official told MoneyControl.
MoneyControl also reported that the committee will not propose tax changes but will focus on simplifying the law to make it shorter and easier to implement.
Expectations of income tax cuts come as problems of slowing economic growth emerge. The Indian economy grew by 6.7 per cent in the June quarter and 5.4 per cent in July-September.
Recently, the Asian Development Bank cut its economic growth forecast for India to 6.5 per cent from 7 per cent in the previous fiscal due to lower than expected due to private investment and housing demand.
The Multilateral Development Bank has also lowered India’s growth forecast for FY 2025-26.
Earlier this month, the Reserve Bank of India also sharply cut its growth forecast for the current fiscal to 6.6 percent from 7.2 percent earlier
