Every year in the run-up to the Union budget, the pressure of expectation builds on the finance minister to provide income tax reliefs. While these voices were heard in the past two years too, this year there is a new dimension — consumption is decelerating in the Indian economy and it is hurting India Inc, who have taken the rare step of urging FM Nirmala Sitharaman to provide income tax reliefs to trigger consumption. With the GDP growth rates showing sings of sluggishness, it is quite natural that the government might find the situation a bit more tricky this time.
In his interaction with News9, co-founder & CEO of Moneyfront, Mohit Gang put forward the logic and said that the finance minister must provide more disposable income at the hands of the people to enable them to spend more. “I think the number of people who pay taxes in India is extremely low — sub 3%. Increasing the base limit from Rs 3 lakh to Rs 5 lakh won’t harm the government too much in terms of finances that it is collecting through direct taxes. The pie of indirect taxes is getting larger, and should ideally become larger and larger as we move on,” Gang said.
Raise basic threshold limit to Rs 5 lakh
On the question whether raising the basic income tax threshold limit will also raise the already significant number of nil tax filers 00 those who file ITRs but don’t pay any taxes — will rise too, the Moneyfront CEO said, “People getting in the tax net in larger numbers has more to do with uncovering of hidden incomes, trying to get more people in the tax net, improving the GST net, improving the overall ease of doing business, and that will happen gradually. I don’t think slabs have anything to do with it per se. As few more nil tax filers will be easy to take as long as it creates more consumption.”
The call to raise disposable incomes
“It’s high time that these calls are heard by the finance ministry and the government. I think the middle class in India is, by all accounts, shrinking. The rich are getting richer and the poor are getting poorer. The income disparity is increasing. There has to be more disposable income in the hands of the middle class in order to spend more and consumer more. Figures show that the consumption in India is suffering. Something has to be done to revive the animal spirit in the economy,” remarked Mohit Gang.
Relief in new tax regime expected
He not only strongly advocated raising the basic threshold limits but also said that he expected the government to do so only in the new tax regime to nudge more and more people to migrate from the old tax regime. “I will not be surprised if the government increase the threshold limits of taxes under the new tax regime. I don’t think there will be any tinkering in the old tax regime. But the new tax regime will be made, and should ideally be made, more attractive so that more and more people move towards the new tax regime. I think there is a gradual nudge by the government also. Under the DTC, the government would want to have a unified and simplified tax structure. Directionally too the new tax regime makes more sense. I expect the basic threshold limits should be increased in the new tax regime. Some benefit should also be given to the senior citizen class.”
The middle class in India is shrinking and the finance ministry must address the issue of triggering consumption, thinks co-founder & CEO of Moneyfront, Mohit Gang. He said that to raise consumption, the basic threshold limit must be raised to Rs 5 lakh at least in the new tax structure and it won’t really matter if the number of nil tax filers go up a little bit. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
