The government is planning to cut tax for individuals to accelerate consumer demand and spur growth, reported Bloomberg, citing anonymous sources.
The government is considering an increase in the taxable income limits — especially the Rs 10 lakh slab — which attracts a 30 percent rate, the report said. But the move will be accompanied by abolishing tax breaks such as the one offered on house rent payments and interest earned on some bank deposits, the report said.
All these measures are expected to be announced in the February 2020 budget, the report said.
Krishnamurthy Subramanian, chief economic adviser at the finance ministry, said the government had slashed corporate taxes to attract investment and was looking for ways to boost consumer demand to support that investment.
"In the short-run, we are taking steps to increase consumption so that anticipating that consumption, investment also goes up," he told Reuters in an interview.
One of the measures on the table is aimed at easing personal taxation and making the whole tax administration simpler. The government is also considering the report of a task force to bring India's six-decades-old tax legislation more into line with those of other countries.
Another step to boost growth
If the government indeed cuts personal income taxes, it will follow recent steps it has taken to spur growth.
Last month, finance minister Nirmala Sitharaman cut corporate tax rates from to 25 percent from more than 30 percent, and to 15 percent for new manufacturing companies, putting it on a par or even ahead of some of its Asian peers.
That landmark move has raised hopes that the government might consider similar cuts to personal taxes to put more money into the hands of consumers and especially the middle class who form the core of Prime Minister Narendra Modi's ruling group.
The government has also been trying to boost domestic growth through an infrastructure package and a new loan program organised with the banking sector that has doled out loans worth over Rs 800 billion.
First Published: IST