The policymakers are considering the possibility of further modification in the new tax regime for individuals by reducing tax rates for the income up to Rs 10 lakh during the upcoming Union Budget for the fiscal 2025-26, which is scheduled to be presented on Feb. 1 by Union Finance Minister Nirmala Sitharaman, according to people familiar with the matter.
The budget is expected to focus on increasing disposable income for taxpayers amid a slowdown in economic growth due to tepid consumption, a person familiar with the development told NDTV Profit.
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The move is expected to drive household savings and consumption. India is witnessing a slowdown in private consumption, which has impacted the overall economic growth of the country.
Some fiscal measures are under consideration, including "tinkering with the tax slabs and rates," a person told NDTV Profit, adding that nothing is finalised and any final decision with this regard will be taken closer to the budget date.
The discussion being held is particularly to tweak the lower income slabs, which would in turn incentivise across income tax groups, the people told NDTV Profit.
The new tax regime, which restricts exemptions and offers few deductions at lower tax rates for individuals, was rolled out in 2020.
The new regime has been witnessing a tremendous shift from the taxpayers who were earlier with the old regime, which offers a slew of exemptions. Official data suggests that about 72% have already moved to the new tax regime, as the Income Tax Department has set the new tax regime as the “default option” for taxpayers.
In the July budget, Finance Minister Nirmala Sitharaman made changes in both tax slabs and rates by increasing the standard deduction from Rs 50,000 to Rs 75,000.
The income tax slabs under the new tax regime are as follows:
Rs 0 to Rs 3,00,000 - 0%
Rs 3,00,001 to Rs 7,00,000 - 5%
Rs 7,00,001 to Rs 10,00,000 - 10%
Rs 10,00,001 to Rs 12,00,000 - 15%
Rs 12,00,001 to Rs 15,00,000 - 20%
Above Rs 15,00,001 - 30%
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