Budget 2025: Why the government hesitates to reduce individual income tax

The NDA government led by Prime Minister Narendra Modi has not made any major modification to the income tax laws since it took office in May 2014, to the great disappointment of many taxpayers. However, he introduced a new simplified tax regime and for those who stay with the old tax regime, it has half reduced the rate to 5% for the lowest tax tiles.

Individual income tax provides significant and stable income to government. His perception goes beyond the income of the Government of Taxes on the profits of societies. (PTI)

The new tax system offers a decrease in tax rates to give up various deductions and discounts for interest paid on housing loans, investment in social security instruments and children’s education expenses.

Individual income tax provides significant and stable income to government. Its collection goes beyond the income of the tax government on the profits of companies. However, each tax discount, deduction and revision of income subject to tax losses for the government.

So, can the ordinary man complain about having obtained a gross agreement from the government? Should the government have to grant more concessions to ordinary people?

It all depends on who is defined as an ordinary man. Ideally, a person with an annual income until ₹10-12 Lakh is suitable for this description.

Compensate for the impact of inflation

The adviser of the Assocham National Council on the direct tax Rahul Garg, who was previously with an audit and consulting firm, explains that income tax rates must be modified if ordinary man is under stress Due to income tax. He stressed that additional discounts announced in the last budget for the employee opting for the new tax regime had made income until ₹7 Lakh in tax franchise. Essentially, those from the bottom of the fiscal pyramid have received relief over the years rather than being overwhelmed.

An argument for the upward revision of the tax exempt from taxes is to compensate for the impact of inflation. Significantly, central inflation – inflation excluding the increase in food and energy prices – has been mainly under control so far. Food inflation has been problematic and has overwhelmed a taxpayer section. But a more important disproportionate impact of food inflation (in particular vegetables) is felt by those outside the tax net.

Ease of conformity

Although low tax rates are high, for many people, in particular entrepreneurs who manage small businesses and start-ups, compliance with tax laws is a larger burden than the tax rate. They must comply with several sections of the income tax law and other tax and commercial laws and maintain files. Garg said their burden can be attenuated by an alleged tax regime, where taxes must be paid on a specified income percentage.

Advantages in exchange for taxes

The government uses tax revenues to offer citizens various advantages in the form of infrastructure and food, education and health subsidized. Tax revenues are also used for the redistribution of resources to the poorer sections of the company. The services received by citizens are much more than the cumulative income tax paid by all taxpayers, said Garg. The flow of advantages can become more effective if the leaks are connected.

The government must redistribute resources to reduce disparity in society, provide various social services and create infrastructure. Income tax income is one of the important sources of resources for these expenses, and most are paid by those who earn above ₹10 Lakh. This makes the government reluctant to reduce income taxes or make “big bang” announcements other than the simplification of the law.