Reports claim that the government may consider cutting down on the personal income tax rates as well as the long-term capital gains tax on equity investments in Budget 2020. The government is also mulling on whether unsettled financial services should be given additional help and if import duties should be increased to enhance private investments and domestic manufacturing. All of these options are being in a bid to improve economic growth.
A senior government official, who also comprises of the budget discussion group, told Reuters, “We are discussing tinkering with income tax rates so that more money is put in the people’s hands.”
Economic growth slumped to 4.5% in the July-September quarter which is a new six-year low for the country. The government has received requests from many factions to cut personal taxation rates to boost the growth of the economy. Earlier last year, Prime Minister Narendra Modi slashed corporate tax to 15% for new manufacturers and to 22% for existing companies.
The present Finance Minister, Nirmala Sitharaman, will be expected to present Budget 2020 on February 1. Another government official that they were considering a proposal for relaxing the long-term capital gains tax from the stock market investments in order to attract investors. “There are various suggestions, including completely removing it,” the official said and also mentioned that a final call was yet to be taken.
An official from the trade ministry also added that import duties on certain items may get changed to endorse domestic manufacturing. In order to promote retail investment in mutual funds and the share market instead of real estate or gold assets, industry groups are requesting the government to remove the long-term capital gains tax. “Additional net disposable income resulting from reduction in personal tax rates could enhance consumption and spur overall demand for goods and services,” the Federation of Indian Chambers of Commerce and Industry said in a submission to the government.