Budget 2020: Create 5 income tax slabs, impose 10% tax rate on income up to Rs 10 lakhs, say experts

The Indian middle-class section is massive indeed. It is also well-off and therefore, one of the biggest entities that pay income tax. The budget is near and everybody wants to know: 'What can the government do for the middle class'? These are some very important questions that need to be answered. Zee Business experts Radhika Gupta, Chief Executive at Edelweiss Asset Management, and tax expert Krishan Malhotra have these answers for everyone concerned.

These experts feel that the GDP needs to get momentum by bringing the declining growth back on track. They say that the government has two big challenges before it - slowing of tax collection and economy. Even the real estate sector needs a strong push.

Figuring from that, these experts feel that the consumption needs to be given a boost in the Budget 2020. They say that the expectation of the middle class is that the government gives an income tax cut in different tax slabs. They say that there should be 5 tax slabs instead of 4 -- 10%, 20%, 30%, 35%. Demand is to bring the income tax rate at 10% for income up to Rs 10 lakhs. They also recommend a surcharge.

The experts also said that the government should introduce the Direct Tax Code (DTC).

The current tax slabs are:
Income slab                                      Income tax

Up to top Rs 2.5 lakh                          No tax
Rs 2.5-5 lakh                                         5%
Rs 5-10                                                 20%
upwards of Rs 10 lakhs                        30%

Around 1.47 cr taxpayers will come under the purview of a 10% tax rate from the current 20% if the government reduces the rate. The salaried class will have more money in their hands. This will then enable money to come in the consumer markets, the experts say and the consumption would increase.

The move will have a positive impact on the market as the production would kickstarting the economy, the expert said.

The government should also incentivize savings that have been falling, the experts said. That will also put money in peoples' hands for consuming. The savings rate in FY12 was around 23.6% which came down to 17.2% in FY 18.

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Only three days are left for the Budget 2020. Finance Minister Nirmala Sitharaman will be presenting Budget 2020 on 1 February.