In a bid to bolster economic growth, Indian Prime Minister Narendra Modi's government has introduced significant changes to the income tax structure. The Finance Minister announced that individuals earning up to 1.28 million rupees will now be exempt from income tax, a notable increase from the previous threshold of 700,000 rupees. This initiative aims to enhance domestic demand and increase disposable income for about one-third of the population identified as middle class. The budget also includes increased capital spending to offset potential losses in revenue resulting from these tax cuts.
The new structure will reduce taxes on middle class and leave more money in their hands, boosting household consumption, savings and investment, Sitharaman said.
To balance the revenue lost, the government has budgeted a modest increase in capital spending this year, which will rise to 11.21 trillion rupees in 2025-26.
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