A high level panel of tax experts and Govt. officials have strongly suggested to reduce income tax for individals, which mainly forms the middle class.
Since Govt. has slashed corporate tax and encouraged entrepreneurship, it is being believed that soon, income tax for individual tax payers can also be reduced.
But, there is another section of tax experts, which believes that the reduction in tax won’t happen right now, since economic growth has slowed down, and there is panic everywhere.
Income Tax Reduction For Middle Class: What Has Been Proposed?
The biggest change which has been proposed by The Committee on Direct Tax Code is 50% reduction in income tax for the individuals who are earning between Rs 5 lakh to Rs 10 lakh. Right now, the income tax for this slab is 20%.
If this recommendation is accepted, then it will be a huge saving for the middle class. This panel is being headed by Central Board of Direct Taxes member Akhilesh Ranjan.
Then panel has also recommended tax rate of 30% for those Individuals who are earning more than Rs 20 lakh, and 35% for those who are earning more than Rs 2 crore.
Right now, individuals who are earning between Rs 2.5 lakh to Rs 5 lakh are taxed 5% tax; those who are earning between Rs 5 lakh and Rs 10 lakh are charged 20% and more than Rs 10 lakh are asked to 30% income tax.
It seems that the Govt. is really keen to implement the changes, and have shown interest in understanding the implications.
An unknown Govt official said, “For the benefit of the common man, the government is considering a sharp reduction in the personal income-tax slabs to some extent.”
But Will These Recommendations Be Implemented?
Some tax experts are stating that the changes may not be implemented right now, since India is batting economic slowdown, and implementing such massive income tax reforms for the middle class will further derail the process towards inciting growth.
At the same time, the panel has recommended removal of several cess and surcharges, which may lead to more individuals voluntarily paying income tax, which in turn will trigger more income for the Govt.
We are awaiting more details.