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    Budget 2020: Nirmala Sitharaman may revise income tax slabs in major relief to taxpayers

    Budget 2020: Nirmala Sitharaman may revise income tax slabs in major relief to taxpayers

    Budget 2020: Nirmala Sitharaman may revise income tax slabs in major relief to taxpayers
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    By CNBC Awaaz  IST (Published)

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    Sources have told CNBC Awaaz's Manish Desai that the government may revise the 5 percent income tax slab to Rs 2.5 lakh to Rs 7 lakh from currently to Rs 2.5 lakh to Rs 5 lakh.

    Repeated calls from experts for relief in the income tax to boost consumer demand may be accommodated in the Union Budget 2020, which will be presented by finance minister Nirmala Sitharaman on February 1.
    Sources have told CNBC Awaaz's Manish Desai that the government may revise the 5 percent income tax slab to Rs 2.5 lakh to Rs 7 lakh from currently to Rs 2.5 lakh to Rs 5 lakh.
    Moreover, the government may propose a 10 percent tax for the income bracket of Rs 7 lakh to Rs 10 lakh, the sources added. For Rs 10 lakh to Rs 20 lakh bracket, the finance ministry may propose a 20 percent rate, according to the sources.
    The income tax rate is likely to be 30 percent for Rs 20 lakh to Rs 10 crore slab and 35 percent for income of Rs 10 crore and above, they said.
    For instance, for individuals earning Rs 10 lakh, Rs 15 lakh and Rs 20 lakh, respectively, it could result in savings of Rs 60,000, Rs 1.1 lakh and Rs 1.6 lakh, respectively. The calculation does not take into account the impact of cess.
    A cut in the personal income tax rate and handing out money to people in the rural area via income transfer schemes are among the many proposals experts believe the government can take to revive consumer demand.
    Others have strongly argued against personal tax cuts on the grounds that income tax cuts would benefit only a small percentage of the population, which may not be the best option to stimulate growth. They feel that the government should use the money it has to invest and stimulate demand.
    Samiran Chakraborty, chief economist at Citi, said, “The income tax cut would benefit only 2-3 percent of the population and may not be the best option to stimulate growth.” He noted that an alternative could be an excise cut on petrol, diesel, which would benefit a large number of people and may spur a bit of FMCG demand.
    “An income tax cut is unlikely to solve all areas of the economic slowdown because most taxpayers are in the lower-income bracket and an effective tax rate cut may not have any impact on the ground,” said Prakarsh Gagdani of 5paisa.com. “However, a cut in goods and services tax (GST) standard rate could provide a much bigger impetus to the economy.”
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