After raising the threshold of taxable income to 12.75 lakh from 7.5 lakh, Union Finance Minister Nirmala Sitharaman has said that the simplification of the income tax is now complete
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With the income tax cut in the Budget 2025-26, Union Finance Minister Nirmala Sitharaman said that the income tax simplification is now complete.
In the Budget 2025-26, Sitharaman proposed to raise the threshold of taxable income to 12 lakh a year from 7.5 lakh. After factoring in deductions, the threshold of taxable income rises to 12.75 lakh. She also proposed to rejig the tax slabs in a way that the maximum slab of 30 per cent tax would be applicable to those earning above Rs 24 lakh. Currently, income above Rs 15 lakh attracts 30 per cent tax.
At a press conference after presenting the budget, Sitharaman said that the process of simplifying the income tax that she started in the last year’s budget is now complete. She linked the tax cut to rationalisations of customs and tariffs and framed the exercise as part of a larger reform.
“It’s a very responsive government and as a result, the income tax simplification which I announced in July is already completed in its works and we shall bring the bill in the next week…So if we are talking of reform inclusive of taxation, the work is done. This budget also speaks about rationalization and customs. Tariffs are being brought down, tariffs are being simplified,” said Sitharaman.
#WATCH | Delhi: Union Finance Minister Nirmala Sitharaman says, “…One thing which I certainly would like to highlight is responding to the voice of the people, which is what Prime Minister Modi is known for in his administration. It’s a very responsive government and as a… pic.twitter.com/bk3ZPQeM6t
— ANI (@ANI) February 1, 2025
As a result of tax cut, Sitharaman said in her budget speech that the government would forego revenue of about Rs 1 lakh crore in direct and Rs 2,600 crore in indirect taxes.
Observers have said that more money in the hand of people as a result of tax cut would result in more consumption that would instead drive the economy. However, critics have said that revenue lost would mean less money for capital expenditure. However, Sitharaman at the press conference said that capital expenditure would not be affected as a result of tax cuts.
“There is no reduction in the public spending on capital expenditure. We continue to place emphasis on the multiplier effect that capital expenditure done by government has shown has sustained us. We continue on that, and with all this, our fiscal prudence has been maintained,” said Sitharaman.