The National Democratic Alliance (NDA) government, led by Prime Minister Narendra Modi, is considering lowering income tax rates for certain categories of individuals to boost consumption. The new income tax rates could be announced in July when Finance Minister Nirmala Sitharaman presents the full Union Budget for the fiscal year 2025.
Rationalizing Tax Slabs
The income tax rate rises sixfold when an individual’s income surges by five times from ₹3 lakh to ₹15 lakh, which is considered steep. The government is looking at rationalizing tax slabs to enhance disposable income and stimulate consumption. This could lead to increased GST collections and a boost in the economy.
Prioritizing Consumption
The government is prioritizing consumption over welfare spending to enhance disposable income. Tax cuts for low-income earners are seen as a better way to increase consumption and economic activity. This move could also help in reviving demand and restarting the investment cycle, particularly in consumer-driven sectors.
Key Objectives
The Modi 3.0 government aims to position India as a USD 5-trillion economy and transform it into a ‘Developed India’ by 2047. The key objectives include addressing agricultural challenges, job creation, sustaining capital expenditure, and enhancing revenue growth to maintain fiscal consolidation.
