TIME FOR A TAX BREAK?

INDIVIDUAL TAXPAYERS LOOK FORWARD TO THE BUDGET EVERY YEAR HOPING FOR A BIG TAX BREAK. IT HAS ELUDED THEM FOR YEARS, BUT WITH HIGH INFLATION, MODERATING URBAN CONSUMPTION, AND ROBUST TAX COLLECTIONS, WILL THE MIDDLE CLASS GET A TAX BREAK IN FEBRUARY?

- BY SURABHI

AS THE GOVERNMENT prepares the Union Budget for 2025-26, which is expected to chart the course for the next four years of Prime Minister Narendra Modi's government, there is one demand that is refusing to go away: a reduction in income tax rates for India's burgeoning middle class.

Consistently high inflation and pricey food items have eaten into the disposable incomes of urban Indians, with private consumption in urban areas seen to be moderating while salaried and middle-class professionals argue that the main burden of personal income taxes falls on them. Besides, they add, consumers already pay high rates of goods and services tax (GST).

THE CASE FOR A CUT

• The number of income taxpayers and the mop-up from non-corporate tax has risen significantly over the years

• High inflation and low salary hikes are eating into the disposable income of the middle classes

• Professionals and salaried individuals contend that a large share of the burden for both GST and income tax falls on them

• Calls for a significant income tax cut had started before the General Elections and have since continued

• Taxpayers are now pinning hopes on Budget 2025-26 to ease their burden

The demand for a reduction in rates comes as the number of individual income taxpayers in the country is estimated to cross the 100-million-mark in FY24, after coming in at 99 million in assessment year 2023-24 (FY23).