The industry body PHDCCI has advocated for a significant reduction in income tax rates for individuals with annual earnings up to Rs50 lakh, proposing that the highest tax rate of 30% should apply only to those with higher incomes. Currently, the new Income Tax regime imposes the 30% rate on individuals earning above Rs24 lakh per year. In its pre-Budget recommendations to Revenue Secretary Arvind Shrivastava, PHDCCI proposed a variety of reforms aimed at both direct and indirect taxation. As the government prepares for the upcoming Union Budget, which Finance Minister Nirmala Sitharaman will present in February, the chamber has emphasized the need for lower tax rates for individuals, partnership firms, and limited liability partnerships.
PHDCCI pointed out that corporate tax rates have already been reduced to 25%, including surcharges, and noted a significant rise in corporate tax collections, which increased from Rs6.63 lakh crore in 2018-19 to Rs8.87 lakh crore in 2024-25. This demonstrates that lower tax rates can lead to greater compliance and increased revenue. The chamber also expressed concern over the current personal tax rates, where the highest slab reaches 39% due to surcharges, which imposes a heavy burden on taxpayers. PHDCCI further recommended that the maximum tax rate for income up to Rs30 lakh should be set at 20%, from Rs30 lakh to Rs50 lakh at 25%, and above Rs50 lakh at 30%.
This adjustment is aimed at enhancing tax compliance and providing significant relief to the middle class.