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Budget 2025: India eyes income tax relief for Middle-class earning up to ₹15 Lakh

Budget 2025: India eyes income tax relief for Middle-class earning up to ₹15 Lakh

Budget 2025: India eyes income tax relief for Middle-class earning up to ₹15 Lakh
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26 Dec 2024 8:43 PM IST

The Government of India is considering an income tax cut for individuals earning up to ₹15 lakh annually in the upcoming February 2025 budget, according to sources cited by Reuters.

This tax relief move could benefit millions of taxpayers if they opt out of the old tax regime. The new system, introduced in 2020, offers slightly lower tax rates but does not allow major exemptions such as those for housing rentals and insurance.

Currently, the annual income of ₹3 lakh to ₹15 lakh is taxed at rates between 5% and 20%, while higher incomes draw a 30% tax rate. The proposed changes aim to provide relief to the middle class and boost consumption amidst a slowing economy. This could particularly benefit urban dwellers burdened by high living costs.

The sources, who requested anonymity as they were not authorized to speak to the media, stated that the exact size of the tax cuts has not yet been decided. A final decision will be made closer to the budget announcement on February 1, 2025. The finance ministry has not commented on this matter.

Reducing tax rates could simplify the tax system and encourage more people to choose the newer, less complicated tax regime. The bulk of India's income tax revenue comes from individuals earning at least ₹1 crore, who are taxed at a 30% rate.

Putting more money into the hands of the middle class could help stimulate the economy, which recently saw its slowest growth in seven quarters from July to September. High food inflation is also reducing demand for various goods, particularly in urban areas.

The government has faced political pressure from the middle class over high taxes and wage growth that hasn't kept pace with inflation. By providing tax relief, the government aims to address these concerns and stimulate economic activity.

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