“The proposed changes aim to boost disposable income and enhance spending power among individuals, thus driving growth in both direct tax and GST collections,” sources shared, adding that the aim behind the proposal is to stimulate economic activity.
Sources further revealed that as part of the proposed tax breaks, “the government is evaluating two primary options for tax relief that would seek to make the new tax regime more attractive for taxpayers. The first option could be to increase the standard deduction limit, raising it from the current ₹75,000 per annum, which would offer immediate tax relief to salaried and pensioned individuals.”
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“The second option could involve an adjustment in the tax slabs in the new regime. Within this option, there are two proposals under discussion. One is to expand the 20% tax slab to include individuals earning between ₹12 lakh and ₹18 lakh or ₹20 lakh annually. Secondly, following the first proposal, the 30% tax rate could be imposed on incomes exceeding ₹18 lakh or ₹20 lakh,” sources said.
They added that this would align the rates with the current tax structures but potentially offer more targeted tax relief for mid-income earners.
At present, under the new tax regime, individuals with incomes between ₹12 lakh and ₹15 lakh are taxed at 20%, and those earning above ₹15 lakh are taxed at the higher 30% rate.
Sources shared that “the government believes these potential tax breaks could lead to more disposable income, which in turn would boost consumer spending—an important driver for economic recovery. Increased spending by the common man is expected to augment both direct tax receipts and GST collections, crucial for the government’s fiscal health.”
However, sources noted that a final decision on the tax relief proposals will be made closer to the budget date, “when senior officials from both the Finance Ministry and the Prime Minister’s Office (PMO) will finalise the proposals.”
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Meanwhile, CNBC-TV18 is awaiting a response from the Finance Ministry on its queries in this regard, and the story will be updated accordingly.
The Indian economy is estimated to grow 6.4% in 2024-25 against 8.2% in the previous fiscal year, the National Statistical Office (NSO) said on Tuesday, January 7, 2025, in its first advance estimates of national accounts. The projection is the lowest since the pandemic and lower than the recent Reserve Bank estimate of 6.6% for the current fiscal year ending March 2025, amid a general slowdown in consumer spending.
It remains to be seen whether any of these proposals will make it through to the budget.
(Edited by : Ajay Vaishnav)