2019 has been a year when the economy went through various phases of economic swings and by now it has been accepted that there is a slowdown in the economy.
The run-up to the budget has always been full of expectation and excitement. But this time around, the Budget 2020 has grabbed a lot more attention because of the slowdown in the economy. People are hoping, the government will take to improve the situation.
“The government is considering a proposal to extend further incentives to salaried taxpayers in the upcoming budget. The Finance Ministry may allow individual taxpayers to pay a lower flat rate of tax if they forego all exemptions.“
Budget 2020 may likely lower the tax rates and bring other reforms for middle-income taxpayers. Currently, there is no tax for those earning up to INR 5 Lakh. Taxpayers earning between INR 5 lakh and INR 10 lakh are taxed at 20% and those above INR 10 lakh are taxed at 30%.
The Finance Ministry may allow individual taxpayers to pay a lower flat rate of tax– According to media reports and sources, this Budget may announce changes in the tax rate for income earners of up to Rs 10 lakh. There are talks about increasing the basic exemption limit to INR 3 lakh, which would lead to lower tax collections across all taxpayers. If a tax cut is in the works, the government will have to take measures in the upcoming fiscal to compensate for it, since tax collections on both direct tax and indirect tax side have been sub-par.
At present, while individual income up to Rs. 2.5 lakh per annum is exempt from tax, a 5% tax is levied for income between Rs. 2.5 lakh and Rs. 5 lakh. A higher 20% slab is for income between Rs. 5 lakh and 10 lakh while a 30% tax rate is applicable for income above Rs. 10 lakh. In addition, the government also levies a surcharge in slabs on super-rich for income above Rs. 50 lakh.
Tax Benefits Under NPS To Be Doubled– The Pension Fund Regulatory and Development Authority of India (PFRDA) has pitched to the finance ministry to raise the tax deduction benefit under the NPS to Rs 1 lakh. At present, the tax deduction limit under NPS is INR 50K. It has also urged the government to extend the tax-free employer’s contribution benefit of 14% to all the NPS subscribers. This facility was made tax-free for the central government employees from April 1, 2019.
The source said that though there is a broad understanding of implementing a flat income tax rate for individuals, discussions are still going on its quantum and how it could fit a tax structure that has three to four different slabs.
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