There may not be any drastic cut in the personal income tax rates after all. At least this is the impression the government seems to be conveying following widespread expectations, especially after the corporate tax rate cut announced recently. There was a recommendation from one of the government-appointed committees on income tax that the tax rates be reduced.
A Times of India report, quoting sources close to the government, it is now being clarified that the government does not have any plans, now or in the coming budget to be presented in February 2020, to cut down the personal income tax rates.
One of the reasons for the heightened demand for reduction in personal income tax has been that the present slowdown in the economy is more due to the constriction in the demand side rather than on the supply side. If the government puts more money in the hands of the people, particularly the tax-paying middle class, it would lead to consumption and therefore a revival in growth. But, the government is not buying into this argument.
The government’s argument is that the present personal income tax structure, with all the exemptions and deductions allowed, ensures a person earning up to Rs 6.5 lakhs a year or around Rs 50,000 a month does not have to pay any taxes. The budget figures of 2018-19 indicate the government gave up as much as Rs 1 lakh crores towards concessions and reliefs to individuals and HUFs.
With all these justifications, it appears there is no hope for those expecting a reduction in the income tax rates for individuals.
There is also this unending debate on what the other countries are up to and where does India stand? Here again, the comparisons are not so cut and dried. Some of the developed countries have social security schemes, which include unemployment doles and free education. In the Indian context, there is no unemployment dole given. Education is available in government run schools but the quality of education there is suspect. On the healthcare front the government has launched only last year a massive public health insurance programme that promises to address the problems faced by the poor in accessing quality healthcare.