New Delhi, February 1: The Union Budget 2020-2021 presented by Finance Minister Nirmala Sitharaman has laid out the roadmap for accomplishing $5 trillion economy. The government putting a stop to all the speculations floating around and has gone for the personal income tax cut. The clear objective behind this move is to spur the consumption in the economy.
The government introduced the new slab in which the income between Rs 5 to Rs 7.5 lakh per annum will attract tax at 10 per cent, between Rs 7.5 lakh to Rs 10 lakh, the tax rate will stand at 15 per cent, for income in between Rs 10 to Rs 12.5 lakh, the income tax will stand at 20 per cent. However, with annual salary between Rs 12.5 lakh to Rs 15 lakh, the new income tax rate will stand at 25 per cent and for income above Rs 15 lakh, the income tax rate stands at 30 per cent.
While in older tax slabs, an individual with income between Rs 5 to Rs 10 lakh will have to shell out tax at the rate of 20 per cent and the income above Rs 10 lakh, the tax rate stands at 30 per cent.
FM Sitharaman made the intention behind the tax cut clear and said: “the tax proposals would bring ease of compliance and reduce litigation. “ She also made this clear that nobody is bound to switch to new and overhauled tax slabs and it is completely optional. That means if someone wants to pay as per the older tax slabs they have the absolute freedom to do so. But those who will be choosing new slabs will have no exemptions and rebates. And these exemptions and rebates would be available only in the older tax slabs.
However, this expected tax cut took place in the backdrop of the faltering economy, which is reeling under huge demand and consumption problems. So in order to boost the consumption in the economy by cutting the personal income tax slab the government wanted to hand over more disposable income in the hand of the people. The government in consonance with the recommendation of a task force constituted under the stewardship of Akhilesh Ranjan, who was a member of Central Board of Direct Taxes (CBDT), submitted its report to the government, which suggested overhauling the personal income tax slab.
Many economists are critical of this move and are of the opinion that this is not going to help the economy in any way.