No change in personal Income Tax Rates in near Term: Revenue Secretary

Personal income tax rates will not be changed in the near term even as peak corporate tax rate will be cut by 5 per cent over a four year period beginning 2016-17, Revenue Secretary said. Finance Minister Arun Jaitley had in his Budget for 2015-16 proposed last week to cut peak corporate tax rate from 30 to 25 per cent in four years beginning next fiscal. He however left personal income tax rates unchanged even though some exemptions limits have been raised.

“Personal income tax at 30 per cent is very much comparable to the international rates and you can not reduce 30 per cent alone, without reducing 20 per cent and 10 per cent rate,” Revenue Secretary Shaktikanta Das told PTI in an interview. “The peak rate of 30 per cent is very reasonable rate even in international standard. This we would like to continue over medium term,” he added.

At present, the peak rate of 30 per cent applies on annual income of individuals above Rs 10 lakhs; 20 per cent on income between Rs 5 lakh and Rs 10 lakh; and 10 per cent on income less than Rs 5 lakh. On whether the government intends to keep these rates unchanged over the next 3-4 years, he said. “Yes that is the intent.” Asked why the government chose to announce cut in corporate tax rates, Das said: “In order to attract investment our corporate tax rate should be competitive to Asean countries (Association of South East Asian Nations).”

He added, “On the taxation side, it was found that our corporate tax rates were higher than the rates which were prevalent in major Asean countries. Our rates have to be competitive. “Therefore Finance Minister had announced that over a period of 5 years we will reduce corporate tax from 30 per cent to 25 per cent and in doing so, exemptions will also be eliminated in the phased manner.” The reduction will happen “evenly” every year beginning 2016-17, Das said, adding that the exact rates and other details will be announced in the next Budget.

 PTI