Finance minister Nirmala Sitharaman on Saturday indicated that the government may soon relax the personal income tax burden to provide relief to individuals and boost consumption by putting more money in the hands of people. The relief, if provided, will come amid a downturn in the economy led by tepid demand and sluggish private investment. “(A cut in personal income tax) One among the many things we are looking at," the minister said at the Hindustan Times Leadership Summit 2019 in the national capital. When asked how soon there will be a relief on personal income tax, the minister said: “wait for the Budget". The Union Budget for fiscal 2021 will be presented in February.
India’s economy grew at 4.5% July-September, the slowest pace in six years. Though the Centre has announced a slew of measures over the last four months to revive growth, the steps are yet to yield the desired results. In September, the finance ministry slashed the corporate tax rates for new and domestic manufacturing companies to encourage businesses to invest more amid a slowdown. For companies that do no avail of any tax incentive, the rate will be 22% from 30% earlier, while the effective corporate tax rate after surcharge will be 25.17%, including cess and surcharges. The corporate tax rate cut will cost the government ?1.45 lakh crore and is expected to widen the fiscal deficit, rating agencies and experts have said.
A cut in personal income taxes would put more pressure on the government’s finances, especially as tax collections have remained tepid. The Centre overshot its annual fiscal deficit target at 102.4% and exhausted 112.5% of the revenue deficit target during April-October. Sitharaman also said the government is taking baby steps towards creating a simplified taxation structure that will ensure assessees are not harassed. The government is also moving towards an exemption-free tax regime, she added.
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