Will Modi 3.0 Budget 2024 propose Income tax cuts?

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Expectations from Union Budget mount amid report of tax cuts

By Pradeep Kumar Panda

Bhubaneswar, June 19: Union Finance Minister Nirmala Sitharaman is all set to present her seventh straight union budget next month. She has so far presented five full-fledged budgets and one interim one as the finance minister in Modi 2.0 government.

With just over a month to go until the budget, anticipations and speculations are high that Sitharaman will give taxpayers some relief this time as the last time anything significant taxpayers witnessed was in budget 2020, when she announced a new tax regime with lower tax slabs.

With the new government sworn in, all eyes are now on the full Budget for FY25. Well, reports indicate that the Budget may be presented towards the end of July with the commencement of the Monsoon Session of the Parliament.

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Pre-budget consultations, starting June 18 and lasting seven to ten days, will influence the final schedule. Depending on when these consultations finish, the budget is expected to be tabled towards the end of July, closer to the third week. The probable dates for Budget presentation vary from July 15 – 22.

There is widespread discussion regarding who will be the key beneficiaries of possible tax rate cuts in the budget? Certain categories of taxpayers might get some good news from the finance minister in this upcoming budget.

According to a Reuters report based on government sources, lowering personal tax rates for certain categories of individuals is being considered as the aim is to boost consumption.

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Individuals earning more than Rs 15 lakh per annum might get tax relief, the report said citing one of the sources.

The changes could be made to the new tax regime introduced in 2020. Under the new regime, annual income up to Rs 15 lakh is taxed at 5-20% while earnings over Rs 15 lakh attract 30% tax.

The personal tax rate jumps six-fold when an individual’s income increases by five times from Rs 3 lakh to 15 lakh, “which is quite steep,” the report said citing another source.

A cut in income tax would see consumption going up due to extra cash in consumer hands. Lowering of taxes for certain categories would also increase savings for the middle class, the report further said.

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While the economy grew at 8.2% in 2023-24, consumption has grown at half that pace, the report said.

Speculations over possible tax rate cuts are also high because PM Modi, while staking a claim to form his government for the third term by getting alliances’ support, had said his government would focus on shoring up middle-class savings and bettering their lives.

India Inc is also hoping to see FM Sitharaman announcing some tax relief measures for the taxpayers, especially smaller ones.

Newly-elected CII President Sanjiv Puri in an interview with PTI said income tax relief for the people in the lowest slab may need to be considered in the upcoming full Budget for 2024-25 considering the high levels of inflation.

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In the interim budget, presented in February this year ahead of the Lok Sabha elections, FM Sitharaman did not announce any changes either in the tax rates or slabs, but now, taxpayers – especially salaried and middle-class – are expecting that she will provide some relief.

In recent years, the government has focused on fiscal consolidation that aims to reduce the fiscal deficit to 5.1 per cent of GDP by 2024-25 and further lower it to below 4.5 per cent by 2025-26.

The Reserve Bank of India (RBI), in its recent Monetary Policy announcement, forecasted a 7.2 percent growth for the Indian economy for FY25. This growth is expected to be driven by improving rural demand and easing inflation.

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