Government may slash personal income tax rate in this budget to offset demonetisation pain

The government is more likely to reduce income tax rates than corporate tax rate in the Union Budget 2017 to be presented on 1 February, according to a report by CNBC-TV18.

The government's focus on individual individual tax payers is because it feels its needs to compensate them for the pain they suffered after the demonetisation of Rs 500 and Rs 1,000 currency notes from 9 November.

The tax rates may be cut

The tax rates may be cut

Ever since the demonetisation there have been speculation the government will get a windfall gain which will help it cut tax rates and boost the consumption demand in the economy. It was expected that about Rs 3 lakh crore worth of old notes will be extinguished which in turn will flow into the government coffers.

Now media reports say this is unlikely to happen given since as much as 90 percent of the the old currency notes is learnt to have returned into the banking system.

However, the expectation from the middle class, a key constituency of the BJP, has not waned and windfall or no windfall, the government will have to cut the personal income tax rate, if it wants to keep them in good stead.

The expectation now is that there could be some tweak in the exemption rules as changing the slabs would result in a fall in the government revenue, the CNBC-TV18 report said.

For full coverage of Union Budget 2017 click here.

Updated Date: Jan 31, 2017 12:20 PM

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