Government officials support rationalising the current income tax structure, particularly for lower income levels, as the Indian economy struggles with decreasing consumption.

Two government officials that The Indian Express spoke with said that given the emphasis on fiscal consolidation, tax rate reductions for individuals making less money are probably going to take precedence over giveaways or overspending on welfare.

According to the authorities, tax cuts could be a more effective way to increase disposable income, which would boost consumption and stimulate the economy.

An official clarified that increasing consumption is thought to be essential for recovering demand, which is essential for resuming the investment cycle and, in particular, for igniting private capital spending in industries that cater to consumers. Naturally, he added, this may increase GST receipts.

“You will unleash consumption in this way (tax rationalisation).” Increased disposable income translates into increased spending, increased economic activity, and increased GST collection. As a result, you can be generating extra income through direct and indirect means. Another official stated that since firms would have more money to disclose, there would also be an increase in direct tax collection.

It has been noted in the talks that the current tax structure’s increase in the marginal income tax is “too steep.” As of right now, the new tax system’s first five percent tax band begins at Rs 3 lakh. The marginal tax rate increases six times, from 5% to 30%, by the time it reaches Rs 15 lakh, or five times. Therefore, the marginal tax rate increases six times while income increases five times, which is rather harsh, the official stated.