ECONOMIC CONSEQUENCES OF TAX RELIEFS IN INDIA

In a surgical strike, perfectly timed to coincide with the Delhi elections, Finance Minister Nirmala Sitharaman cut income tax rates across the board from 1st April 2025.

- HARDAYAL SINGH

A total income of Rs 12 lakhs will henceforth not attract any income tax. This figure earlier stood at Rs 7 lakhs. Simultaneously, the FM also reduced other rates of income tax in such a way that taxpayers with a total income of Rs 12 lakhs would save Rs 80,000; this relief gradually increases to Rs 1.10 lakhs when such income rises to Rs 24 lakhs or higher. Thus while all taxpayers have benefited from this reform, more than a third of the existing 8 crore taxpayers have been absolved of all liability to pay any income tax.

Now that the euphoria created by this measure amongst the middle classes has now quietened, we can analyse its impact much more holistically - on tax revenues, work ethic, taxpayer behaviour and morality.