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India May Raise Income Tax Threshold in Budget to Revive Economy

The proposed tax move would put at least Rs 2,500 more in the hands of each of India’s 50 million taxpayers.

India May Raise Income Tax Threshold in Budget to Revive Economy
An employee and a customer handle Indian Rupee banknotes. (Photographer: Prashanth Vishwanathan/Bloomberg)

(Bloomberg) -- India is considering increasing the personal income tax threshold in next month’s budget, according to people familiar with the matter, as authorities seek to kickstart consumption in the economy.

Finance Minister Nirmala Sitharaman may raise the tax exemption limit for working-age individuals to 300,000 rupees ($4,316) of their annual income, up from the current 250,000 rupees, the people said, asking not to be identified as they aren’t authorized to speak publicly about the proposals. The tax measures haven’t been finalized yet.

Any tax exemptions will add stimulus to an economy that’s slowed sharply this year, with growth reaching a five-year low of 5.8% in the first three months of the year.

The proposed tax move would put at least 2,500 rupees more in the hands of each of India’s 50 million taxpayers. It could also add to pressure on the budget deficit, which is pegged at 3.4% of gross domestic product for the current fiscal year that began on April 1.

The Finance Ministry is also looking at raising the tax exemption limit for savings and investments made under the so-called Section 80C of the Income Tax law, the people said. The ceiling is currently set at 150,000 rupees.

D.S. Malik, a spokesman for the finance ministry, declined to comment as budget discussions are confidential. Sitharaman is due to present the budget in India’s lower house of parliament on July 5.

To contact the reporters on this story: Vrishti Beniwal in New Delhi at vbeniwal1@bloomberg.net;Shruti Srivastava in New Delhi at ssrivastav74@bloomberg.net

To contact the editors responsible for this story: Nasreen Seria at nseria@bloomberg.net, Karthikeyan Sundaram

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