The imperative for reform in India’s personal income tax regime looms large as we approach the Union Budget for 2024-25. The shift of domestic companies to a lower tax bracket five years ago has notably increased pressure on individual taxpayers, who now bear the brunt of tax collections with peak rates surpassing 40 percent. This disparity has accentuated disenchantment among the middle-class, feeling neglected by successive governments in terms of tax relief.
The current tax structure, despite offering an exemption-free alternative, fails to entice taxpayers away from the old regime, where deductions and exemptions still hold sway. A strategic overhaul is essential, necessitating sunset clauses for these antiquated benefits while significantly elevating the standard deduction to ₹1.5 lakh. Such measures not only align with the rising cost of living, particularly in urban centers, but also cater to the diverse needs of non-salaried professionals.
Furthermore, adjustments to income slabs are overdue; the current threshold of ₹3 lakh is inadequate against inflationary pressures, demanding an increase to at least ₹5 lakh. Similarly, the 30 percent tax rate threshold must be revised upwards to ₹20 lakh, acknowledging the evolving economic landscape and easing the burden on middle-income earners.
In parallel, provisions like Section 80C warrant reevaluation, their relevance diminished in a market-oriented savings environment. A robust standard deduction would empower savers, encouraging investment in instruments aligned with personal financial goals, rather than mandating traditional savings vehicles.
In addressing concerns over wealth disparity, the retention of surcharges on high incomes above ₹50 lakh remains pertinent, ensuring equitable distribution without resorting to more draconian measures. This levy underscores a commitment to welfare spending, vital for social equity and sustainable economic growth.
Looking forward, the Union Budget must embrace these reforms to realign India’s tax policy with contemporary economic realities, fostering fairness and incentivizing economic participation across all strata of society.