New Delhi: In what could be a major sop for the middle class, the Government may reduce the highest slab in income tax from 30 per cent to 25 per cent in the forthcoming Union Budget for 2018-19. This is applicable on those having income of more than Rs 10 lakh per annum. The move, which according to highly placed sources is being seriously considered by the Centre, seems to be aimed at widening the gamut of direct tax - quite similar to how the indirect tax net has increased with the introduction of Goods and Service Tax (GST).
Sources privy to details informed this newspaper that while the 30 per cent tax slab could be reduced to 25 per cent, the possibility of introduction of a new tax slab could not be ruled out as this would help in increasing direct tax collections.
With a major chunk of the 'new middle class' falling in the above Rs 10 lakh per annum income group, on which the 30 per cent income tax is levied, the proposed move could prove to be a windfall for them.
Concerned over the fact that in a nation of over 125 crore people, hardly an average of three crore people file their returns and in fact during the assessment year 2014-15 only 25 lakh taxpayers had declared their annual income of over Rs 10 lakh (which is a measly 8 per cent of the total taxpayers), the Government is said to be considering the aforementioned proposals.
The proposal for reducing the highest income tax slab, sources said, is learnt to have been discussed by the Prime Minister's Office (PMO) with Finance Ministry and Niti Aayog officials.
In 2016-17, direct tax collections were Rs 8.47 lakh crore while provisional figures of net direct tax collections up to September, 2017 for the current financial year (2017-18) stood at Rs 3.86 lakh crore. Major direct tax components are income tax, wealth tax, corporate tax and securities transaction tax, among others.
If the proposed move is introduced in the forthcoming Union Budget then direct tax collections could get a major boost in the forthcoming financial year.
As of now there is no income tax on the income group of 0 to Rs 2,50,000 per annum, while the income tax levied on the income group of Rs 2,50,001 to
Rs 5,00,000 per annum is 5 per cent.
On the income group of Rs 5,00,001 to Rs 10,00,000, the tax levied is 20 per cent, while it is 30 per cent on those having income of Rs 10 lakh and above.
