Business Market 30 Oct 2019 Market abuzz with ta ...

Market abuzz with tax cut rumours

DECCAN CHRONICLE. | GURDIP SINGH
Published Oct 30, 2019, 4:57 am IST
Updated Oct 30, 2019, 4:57 am IST
Such an arrangement will lower the burden on smaller taxpayers, modestly better for mid-tier but raise tax incidence on higher tiers.
Tax rate on incomes over Rs 5 lakh might be lowered and subjected to differentiating rates (10 per cent, 20 per cent, 30 per cent etc.).
 Tax rate on incomes over Rs 5 lakh might be lowered and subjected to differentiating rates (10 per cent, 20 per cent, 30 per cent etc.).

Singapore: Following the surprise move to cut corporate taxes last month, speculation is high that a reduction in personal income taxes is on the cards in India, a report by Singapore's DBS Bank said on Tuesday.

With the all-in corporate tax rate at 25 per cent, it is likely that personal income tax rates, which are at 30 per cent plus levels, will also be lowered, surcharges notwithstanding, it suggested.

 

“Markets are divided on the timing of such a move,” added DBS in the Flash report 'India: Personal income tax cuts likely in the pipeline'.

A combination of an increase in the basic exemption limit and introduction of a differentiated tax rate structure for higher incomes might be on the cards—for instance, the minimum tax slab could be raised to Rs 5 lakh vs Rs 2.5 lakh at present, according to DBS.

Tax rate on incomes over Rs 5 lakh might be lowered and subjected to differentiating rates (10 per cent, 20 per cent, 30 per cent etc.).

 

Such an arrangement will lower the burden on smaller taxpayers, modestly better for mid-tier but raise tax incidence on higher tiers.

Speculation is that the announcement is imminent, but the authorities might also prefer to bide time and announce any rework in the personal income taxes at the budget due in February 2020, according to the report.

Any increase in the basic exemption limit will be beneficial for the small taxpayers whose total income is below Rs 5 lakh, said DBS, noting that the February 2019 Budget had already provided rebate relief for Rs 5 lakh and below.

 

Estimates of the likely cost of a review of the existing income tax slabs range from Rs 1lakh crore to Rs 1.5 lakh crore.

Considering the revenue arrangements with the states, the impact on the Centre's finances could be to the tune of 0.3-0.5 per cent of GDP, DBS said.

The share of direct taxes to India's total tax revenues peaked at 61 per cent in FY09-10 and has since stabilised around 55 per cent last year.

As a percentage of nominal GDP, tax revenues make up around 11 per cent, within which the share of direct taxes has hovered around 5.5-6 per cent of GDP in the past three-four years. Income tax collections amounted to Rs 4.7 lakh crore last year i.e. 2.5 per cent of GDP.   

 

 —PTI

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