Budget 2024-25: There are reports that the central government is considering raising the income tax exemption limit, likely under the new tax regime, which features lower tax rates but fewer deductions.

This measure aims to provide individuals, particularly those in lower income brackets, with more disposable income.

The announcement is expected in the upcoming budget, anticipated in mid-July 2024.

According to Moneycontrol, the goal is to stimulate GDP growth by boosting consumption amid subdued spending levels among the middle class.

The government plans to raise the income threshold for tax liability from the current Rs 3 lakh to Rs 5 lakh in the forthcoming budget, targeting taxpayers under the new regime to increase disposable income among lower-income groups.

Another report by Reuters suggests the government may also lower personal tax rates for certain income categories, which could help stimulate consumption in Asia’s third-largest economy.

A post-poll survey by Reuters indicated that voters are concerned about inflation, unemployment, and declining incomes.

While the Indian economy grew at 8.2% in 2023-24, consumption has grown at half that rate.

Tax cuts could boost consumption and savings for the middle class, according to sources cited by Reuters.

Individuals earning over Rs 15 lakh annually might see some tax relief, though specifics are yet to be determined.

Currently, income up to Rs 15 lakh is taxed at 5%-20%, while earnings over Rs 15 lakh are taxed at 30%.

The government may consider lowering personal tax rates for annual incomes of Rs 10 lakh, with a new threshold under discussion for the 30% tax rate under the old system.

Any loss in tax revenue from these cuts could be offset by increased consumption among these income earners, according to sources.

The government aims for a fiscal deficit of 5.1% of GDP by March 2025.

Strong tax collections and a significant dividend from the central bank are expected to provide the government with flexibility in planning the first budget of its new term, according to Reuters.