In view of the economic slowdown and revenue receipts lower than the government, the possibility of giving relief to the super rich in personal Income Tax Rate is not visible at present. Sources have said this.
In recent times, the suggestion has been growing that personal income tax rates should be cut to boost demand in the economy. In order to increase demand and investment, the government has earlier made a big cut of 10 percent in corporate tax for companies. Since then, the demand for relief in personal income tax has increased.
Income Tax Cuts are Difficult Due to These Reasons
Sources say that in the current situation it is very difficult to cut personal income tax rates. There are many reasons such as economic sluggishness, low tax receipts and non-tax receipts also remain below the estimate, due to which it will be very difficult to cut the income tax rates.
Target to get Rs 13.80 Lakh Crore Direct Tax
The government had not been able to achieve its direct tax receipts even in the last financial year. Direct tax includes company tax, personal income tax. A high target of Rs 13.80 lakh crore has been set for direct tax receipts for the current financial year.
Pressure on Direct Tax Collection
The government needs more funds for social security schemes like Ayushman Bharat, Mahatma Gandhi National Rural Employment Guarantee Scheme, PM-Kisan and PM Awas Yojana. The government is in great need of funds for these schemes because there is already pressure on indirect tax receipt.
Decline in GST Collection
Revenue receipts in the Goods and Services Tax (GST) have come down in recent months. Apart from this, the government has estimated to leave revenue of Rs 1.45 lakh crore as a corporate tax deduction. For the first time in 28 years, the government has directly cut the company tax by 10 percent for companies to lift the economy.
5 Lakh Salan has Already Been Tax Free
The economic growth rate reached a six-year low of 5 percent in the first quarter of the current financial year. Sources say that the government is already giving many types of concessions to taxpayers. Personal taxpayers’ annual income of Rs 5 lakh has been almost tax free.
The government has increased the tax surcharge on the super rich in the budget 2019-20, while increasing the expenditure on social security works. Increasing the surcharge on super rich earning Rs 2 crore to 5 crore annually, increased the tax rate on them to 39 percent and the surcharge on those earning more than Rs 5 crore, increased the tax rate to 42.74 percent.
Committee on Direct Tax, Talked About Tax Cut
As soon as the government announced a reduction in company tax, since then, the demand for reduction in personal income tax rate also started to arise. The Committee on Direct Taxes Code has also talked about softening of personal income tax in its report. On the other hand, it has been suggested to improve tax compliance to increase revenue receipts.
The share of direct tax in the total tax revenue of the country is quite high. In the year 2009-10, the share of direct tax in total tax revenue was 61 percent. Last year it was around 55 percent. In the last financial year, personal income tax receipts stood at Rs 4.7 lakh crore, or 2.5 per cent of GDP, while this year the target of 23 per cent ambitious growth in personal income tax receipts has been set, whereas in 2018-19, this growth was only 10 percent.