The size of the income tax rate cut has not been decided yet and the final decision would be taken closer to the budget on February 1, according to Reuters.
In order to provide relief to the middle class, the central government is likely to cut income tax for individuals earning up to Rs 15 lakh per annum in the upcoming Budget 2025-26, according to a Reuters report citing two government sources. The move will be aimed to boost consumption in the economy amid slowing growth.
“The sources, who did not want to be named because they were not authorised to talk to the media, said they had not decided on the size of any cuts. A decision would be taken closer to the budget on February 1,” according to Reuters citing the sources.
Eminent economists have also urged Prime Minister Narendra Modi to cut income tax rates to ease the burden on citizens. PM Modi on Tuesday met eminent economists and sectoral experts at NITI Aayog to hear their views and suggestions for the upcoming Budget.
In the meeting, the economists and sectoral experts have reportedly asked the government to cut income tax, rationalise customs tariffs and introduce measures to support exports in the upcoming Budget.
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Union Finance Minister Nirmala Sitharaman is scheduled to present the Budget for 2025-26 in the Lok Sabha on February 1, 2025.
FM Nirmala Sitharaman in the last Budget 2024-25 in July announced a comprehensive review of the Income Tax Act. Following this, the review committee was constituted led by Chief Commissioner of Income Tax V K Gupta. The panel is expected to submit its report before the Budget 2025-26.
However, according to a Moneycontrol report citing an official, “The new I-T Act, unlikely to be presented in the upcoming Budget Session, will take more than a year to come into effect.”
“It is likely to take more than a year. Systems have to adapt to the changes. Since it will be a whole new Act, it will be much more complex. All rules and new forms have to be enabled, tested, and system-integrated, and that will require time,” a senior government official told Moneycontrol.
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Moneycontrol has also reported that the committee will not propose changes to tax rates but will focus on simplifying the legislation to make it more concise and user-friendly.
The income tax cut expectations come against the backdrop of worries around the deceleration of economic growth. The Indian economy grew 6.7 per cent in the June quarter and 5.4 per cent in the July-September period.
Recently, the Asian Development Bank (ADB) lowered India’s economic growth forecast to 6.5 per cent for the current financial year from its earlier estimate of 7 per cent due to lower-than-expected growth in private investment and housing demand.
The multilateral development bank has also lowered India’s growth forecast for the 2025-26 financial year.
Earlier this month, the Reserve Bank of India also significantly lowered the growth projection for the current fiscal year to 6.6 per cent from 7.2 per cent earlier.
