In the 2019 interim budget, Modi government increased the income tax exemption limit to 5 lakh rupees. The NDA government has doubled the income tax exemption limit from the existing 2.5 lakh rupees. As of now, the tax on income up to 5 lakh rupees stands at 10 percent. The corporate tax which is 25 percent for the companies making turnover up to 250 crore rupees is expected to remain the same.
The increase in income tax exemption limit has come as a gift for the middle class by the Modi government. Earlier, the middle class was benefitted from the implementation of GST. According to research based on consumer expenditure data, a household would be saving Rs 320 every month on their monthly spend of Rs 8,400 on 10 goods- cereals, edible oil, sugar, chocolates, namkeen and sweets, cosmetics and toiletries, washing powder, tiles, furniture, and coir products and other household products. Earlier, tax in the monthly expenses of 8,400 rupees on daily-use items was 830 rupees while in the post-GST era, it has been reduced to 510 rupees thus saving almost 320 rupees for the consumer. A few weeks ago, PM Narendra Modi announced that the government shall ensure that 99% of goods will be brought under the 18% GST slab or lower, leaving only luxury & sin items in the 28% tax slab.
Between 2014 to 2018, several incentives on the front of income tax have been given to the middle-class taxpayers, which included step like the raising of basic exemption limit from an annual income of Rs 200,000 to Rs 250,000. The tax rate for the lowest tax slab was dropped to 5% from 10% in 2017 saving the taxpayer a total amount of Rs. 17500. Secondly, Tax-free income for salaried class and pensioners was also raised to Rs 290,000 by way of Rs 40,000. Consequent upon these benefits, the tax liability of a person having an income of Rs. 500,000 has come down to Rs 5,200 in FY 2018-19 from Rs 18,540 in FY 2013-14. And now finally in 2019, the Income-tax exemption limit has been raised to five lakh rupees
The middle class has benefitted, in more ways than can be summarized in one go, while also keeping up with some mammoth reforms like demonetization and GST. The wellbeing of the poor as well the health of the economy and its PSUs is paramount to the nation’s progress and it can well be credited to the honest taxpayers, but unlike tax brackets, progress may not always be consistent and can only be made possible with performance-oriented governments that have a far-sighted vision for the country.