Income Tax Rate Cut Likely in Union Budget 2025:The central government is considering reducing income tax in the upcoming budget. In a recent report, quoting sources, it has been claimed that the benefit of this possible cut in income tax can be availed by those people whose annual income is up to Rs 15 lakh. According to the latest report of Reuters, the central government is considering reducing income tax in the budget to be presented in February 2025. This step can be taken mainly to provide relief to the middle class and people living in urban areas.
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Middle class will get relief
According to the report, people living in urban areas are often facing economic pressure due to high cost of living and nominal increase in salaries. The government believes that by reducing income tax, more money will come into their hands, which will increase their spending power. This will not only improve personal expenditure but will also strengthen the Indian economy. It is expected that this change will benefit most those people whose annual income is up to Rs 15 lakh.
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New tax regime will get a boost
Under the new tax regime introduced in 2020, tax is levied at 5% to 20% on annual income between Rs 3 lakh to Rs 15 lakh. However, it does not provide the benefit of discounts like housing rental and insurance. The government believes that by reducing the tax rate, more people will adopt this new system, which is simpler and less complex.
How much can be the impact of tax cut?
No rate of this possible tax cut has been mentioned in the report. Nevertheless, this step may lead to some reduction in the government’s revenue. But in the long run, this decision can prove to be effective in increasing tax compliance and the number of taxpayers and can bring stability in tax collection.
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Government’s popularity will increase
The middle class has been demanding reduction in tax rates for a long time. Due to rising inflation and very nominal increase in salaries, people are worried about their financial condition. The reduction in income tax will not only provide them financial relief but this step can also prove helpful in increasing the popularity of the government among the middle class.
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There will be benefit from increase in consumer demand
If this proposal is implemented in Budget 2025, it will be a big relief for the middle class. The economic growth rate in India has slowed down in recent months. The growth rate in the July to September quarter was the lowest in seven quarters. Along with this, food inflation and rising prices of other essential commodities have also affected the spending power of the people. In such a situation, this step of tax reduction can help in reviving the demand. Increasing spending power of the middle class may increase consumer demand in the market. It can also have a positive impact on sectors like automobile, FMCG, and real estate. Overall, this step can prove to breathe new life into the Indian economy.
