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Informist, Saturday, Feb. 1, 2025

NEW DELHI – The government hopes that the reduction in income tax announced in the Union Budget for 2025-26 (Apr-Mar) returns to the economy in the form of consumption, savings and investments, Finance Secretary Tuhin Kanta Pandey said, at the post Budget press conference. Around 10 million people would benefit from the move, he added. 

In a major income tax bonanza for the middle class, Finance Minister Nirmala Sitharaman said while presenting the Budget on Saturday that there would be no tax on income of up to INR 1.2 million. The benefit of the tax exemption for income up to INR 1.2 million will be given through a tax rebate.

The move comes against the backdrop of experts batting for the need to increase disposable income in the hands of taxpayers to boost consumption in the economy and support GDP growth, which is seen slowing to a four-year low of 6.4% in FY25.

However, Sitharaman, who was also present at the post-Budget press conference, maintained that there is no decrease in public spending on the back of capital expenditure. "There is no reduction in public spending on capital expenditure. Let's put that up front. We continue to place emphasis on the multiplier effect that capital expenditure done by the government has shown has sustained us," she said. 

The Budget projected the central government's capital expenditure for the next financial year starting April at INR 11.21 trillion, up 10.1% from the revised estimate of INR 10.18 trillion for FY25. The revised capital expenditure for FY25 is INR 927 billion lower than the Budget estimate of INR 11.11 trillion. The sharp downward revision in public spending in FY25 – which the government explained as a slowdown owing to election-related restrictions – had raised doubts in certain quarters that perhaps the government was reaching its spending avenue limits. 

Allaying worries, Department of Economic Affairs Secretary Ajay Seth said that there was no capacity issue. "...new sectors are coming up (in the) urban sector, allocations are increasing," he said. 

INCOME TAX BILL

In her Budget presentation, Sitharaman had said that the government would introduce a new Income Tax Bill next week, adding that the new Bill would be simpler and would make it easier for taxpayers to calculate taxes and file returns. While speaking at the post-Budget press conference, Sitharaman said she hopeed the Bill is passed in Parliament without much difficulty. She said that the work on simplification of income tax is completed since the current dispensation is a "responsive government".

"As a bill, any bill goes to the standing committee and the standing committee will of course consult with many stakeholders and then when it comes to us, if necessary, any more amendments need to be brought in, we will take it forward in the house," she said. 

Further, the finance secretary said that 75% of Indian taxpayers had moved to the new income tax regime, and he expects almost everyone to do the same. The government had introduced a new simplified tax regime in Budget FY21. Under the old tax regime, taxpayers can claim deductions under various sections of the Income Tax Act, while the new tax regime eliminates most deductions and offers lower tax rates.  End

Reported by Priyasmita Dutta and Krity Ambey

Written by Pratiksha

Edited by Avishek Dutta

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