Business & Economy

FM Nirmala Sitharaman expressed a desire to eliminate taxes but acknowledged the challenges India faces in taxing the middle class.

Union Finance Minister Nirmala Sitharaman expressed a wish to significantly reduce taxes but acknowledged the complexities of India’s unique challenges. Speaking at the Indian Institutes of Science Education and Research, she emphasized the importance of tax revenue for funding essential sectors like research, renewable energy, and innovation.

In her seventh Budget, Sitharaman introduced several key tax reforms, including:

  1. Income Tax Act Review: A comprehensive review of the Income Tax Act of 1961 is planned, expected to benefit the middle class, with completion anticipated in six months.
  2. Revised Tax Regime: The updated tax structure under the New Tax Regime is designed to save taxpayers up to Rs 17,500. The new slabs are:
    • Rs 0-3 lakh: Nil
    • Rs 3-7 lakh: 5%
    • Rs 7-10 lakh: 10%
    • Rs 10-12 lakh: 15%
    • Rs 12-15 lakh: 20%
    • Above Rs 15 lakh: 30%
  3. Income Classification Change: Income from renting out a house will now be taxed under ‘income from house property’ instead of ‘profits and gains of business or profession.’
  4. Simplified TDS Procedures: New standard operating procedures (SOPs) for TDS defaults will be introduced, along with a simplification of the compounding of such offences.
  5. Charitable Trusts: Two tax exemption regimes for charitable trusts will be merged into one.
  6. Capital Gains Tax Adjustments: Short-term capital gains tax has been reduced to 20%, and long-term gains to 12.5% for specific assets, with new taxes applied to unlisted bonds and debentures.
  7. Increased Securities Transaction Tax (STT): The STT on option sales has been raised from 0.0625% to 0.1%, and increases in STT on futures and options have also been implemented.

Sitharaman highlighted that while significant tax reductions would be ideal, the government is committed to generating revenue to support critical national investments and manage the country’s challenges effectively.

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