Increasing threshold

More people should pay income tax

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The decision, announced in the Union Budget, to change income-tax slabs and rebates such that no tax will be due on an income of ₹12 lakh and below has been widely welcomed. While the change in tax slabs and rates also means that those with higher taxes will have their burden reduced, the highlight is the fact that those earning ₹1 lakh a month in regular income—a little more for salaried workers, thanks to the standard deduction of ₹75,000 a year—will no longer be required to pay income tax.

The government has presented this as a sign of faith in the middle class. Other commentators view it as a mechanism for reviving consumer demand and growth in the economy. Yet there are certain basic questions that must be asked about these changes, and about the logic behind them.