In what could be a major relief for the middle class, the Ministry of Finance is expected to provide income tax relief for the middle class in the Union budget 2020-21. The central government has held multiple discussions on this issue to spur economic growth and the proposal to reduce the tax burden is seen as a step to boost demand in the country.
As per a report in The Indian Express, the Finance Ministry has plans under which the tax implications on the middle class will have to be formulated in such a way that the total cuts would come down by around 10 percent of their total earnings for the year.
In simpler terms, if an individual has a tax outgo of around Rs 1 lakh, then the government will tweak the tax arrangement in such a way that the person will have an effective reduction by Rs 10,000 in his tax outgo. One of the officials requesting anonymity said, "We are going through a number of suggestions. One view is to remove all surcharges on the middle class and to keep the income tax structure simple. Some tax relief is being thought of, either in the form of an adjustment of tax slabs or the removal of the surcharges."
Tax incentives to home buyers
Further, the government is also planning to provide tax incentives to the individuals for buying home. Another official added that real estate being an important sector and has a ripple effect in the economy there is a possibility that they will be benefitted in the upcoming budget. He said, "Discussions are underway on possible measures and an increase in tax incentive for new home purchase could be provided to push home purchase and absorption of unsold inventory."
The government is facing a tough time on fiscal front amid lower than expected tax collection through Goods and Services Tax (GST). Although the last two months have witnessed GST collection going beyond one lakh crore its sustainability is still doubtful. With the middle class expecting some relief and government exploring ways to ramp up its revenues, the latter will have to make a balance. Last year when the centre announced a major cut in the corporate tax, many experts argued for a cut in the income tax rate for individuals which will increase consumption in the economy.