In a significant move to alleviate the tax burden on middle-class taxpayers, Union Finance Minister Nirmala Sitharaman announced an increase in the income tax exemption limit from Rs.7 lakh to Rs.12 lakh. This change aims to ensure that individuals earning up to Rs.1 lakh per month are not subject to income tax.
During a media interaction, Finance Minister Sitharaman explained that the government’s decision was driven by the objective of providing relief to taxpayers across various income levels. She stated, “The government feels that if someone earns Rs.1 lakh per month on average, she should not have to pay tax.” To achieve this, the government is implementing two key measures:
- Reducing Tax Slab Rates: By lowering the tax rates, the government aims to create a more uniform and progressively structured tax system.
- Expanding Tax Brackets: Widening the tax slabs allows for broader relief across different income groups.
Finance Minister Sitharaman further emphasized that the government’s approach differs from previous administrations. She noted, “Unlike the Congress-era tax system, the government decided to offer extra benefits beyond slab rate reductions by introducing an additional rebate for some taxpayers.” This strategy is intended to put more money back into the hands of the people, thereby stimulating economic growth through increased consumption, savings, and investment.
Comparing the current tax structure to that of 2014, Sitharaman highlighted the substantial benefits for taxpayers. She pointed out that individuals earning Rs.8 lakh annually now have nearly Rs.1 lakh more in their pockets, as they no longer pay Rs.1 lakh in taxes. Similarly, those earning Rs.12 lakh annually, who previously paid Rs.2 lakh in taxes, now retain the full amount. She added, “Moreover, someone earning Rs.24 lakh, who had to pay Rs.5.6 lakh in taxes in 2014, now pays Rs.3 lakh, leaving Rs.2.6 lakh more in their pocket.”
These tax reforms are expected to enhance disposable incomes, thereby boosting consumer demand and contributing to overall economic growth. The government’s initiative reflects a commitment to supporting the middle class and fostering a more equitable tax system.
