Kotak Institutional Equities in its budget expectation note has suggested the government should look to cut personal taxes in the upcoming budget.
What Happened: The brokerage firm said that it projects an income tax growth rate of 16% for FY25, compared with the 11% growth assumed in the February interim budget for FY2024.
The research firm also added that the government may reduce the income tax rate for the low-income slabs, “which may result in lower income tax revenues (similar to the budgeted amount in the February interim budget).”
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The brokerage detailed two possibilities: If there are no changes to the tax rates or slabs, the government will need to revise the estimates higher and if the National Democratic Alliance government reduces the tax burden at the lower-income slabs, disposable income will increase in this segment and boost consumption.
“We assume the government would leave income tax rates unchanged. Nonetheless, we believe the tax slabs should be rationalised to reduce the tax burden, particularly at the lower end of the income pyramid,” the analysts added.
Talking about capital gains tax the analysts said they are not sure if the government would want to introduce changes in the July budget without additional consultation on this sensitive issue. “We assume that there would be no changes to the capital gains framework,” the analysts added in the report.
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