New Delhi: The middle class taxpayers are expected to get a big relief from the government. There are reports that the government may reduce tax liability on annual salary up to Rs 10.5 lakh in this budget. This may be announced in the upcoming budget to be presented on February 1, 2025.
The proposal aims to boost consumption amid a sluggish economy and rising inflation. Currently, income between ₹3 lakh and ₹10.5 lakh is taxed at 5% to 20%, while income above ₹10.5 lakh is taxed at 30%.
Option to choose from 2 regimes
- Old Regime: Which includes exemptions like house rent and insurance.
- New Regime (2020): Which comes with lower tax rates but most of the exemptions are removed.
- Through the proposed cuts, the government wants to encourage more people to adopt the 2020 structure.
According to Economic and Political Context
reports, India’s GDP growth in July-September 2024 was the weakest in seven quarters. At the same time, food inflation has increased pressure on the incomes of urban households, which has affected the demand for vehicles, household goods and personal care products. Experts believe that if this proposal is implemented, more disposable income will come into the hands of consumers, which can accelerate economic activity in India.
Government Position
According to sources, the decision on finalising the size of the tax cut and other details will be taken closer to the budget date. However, the Finance Ministry has not made any official statement on the proposal or its impact on revenue. It is believed that the inclusion of more people in the new regime will compensate for the revenue loss suffered by the government.
Profit expectations
If this proposal is implemented, it will bring relief to lakhs of taxpayers. This move will not only boost economic activities but will also fulfill the government’s objective of adopting a simpler tax structure.
