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India Could Lower Income Tax Slabs in Upcoming Union Budget

India is considering lowering income tax rates under its voluntary tax framework, with a decision to be taken by the Prime Minister's Office ahead of the Union Budget 2023 due on February 1. The new tax regime could exempt annual incomes of up to ₹2.5 lakh, while raising tax rates on incomes over ₹15 lakh.

India is considering lowering rates under its voluntary income tax framework and could introduce revised slabs in the upcoming Union Budget 2023 due on February 1, news agency Reuters reported today. However, a final decision would be taken by the Prime Minister’s Office. Under the option without deductions introduced in FY21, there are six slabs; 5%, 10%, 15%, 20%, 25%, and 30%, as against three under the one with benefits at 5%, 20%, and 30%. Under the new tax regime, annual income of up to ₹2.5 lakh is exempt, while a 5% tax applies on annual income between ₹2.5-5 lakh. An income of ₹5-7.5 lakh attracts a reduced tax rate of 10% and 15% for income between ₹7.5 lakh and ₹10 lakh, 20% on ₹10-12 lakh, 25% on ₹12.5-15 lakh and 30% on above ₹15 lakh. Individuals can currently decide which set of rates they want to be taxed under.

Finance Minister Nirmala Sitharaman said on Sunday that she was aware of the pressures of the middle class and that she identified with the middle class. Ahead of the Union Budget, she acknowledged the concerns of the middle class and expressed that she was taking them into account. With the Union Budget due on February 1, expectations are that the government will raise the income tax limit and provide relief to the middle class taxpayers, as well as others. Ultimately, the decision on whether or not to lower income tax slabs rests with the Prime Minister’s Office.

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