India’s finance minister announced significant income tax cuts on Saturday (1), aiming to support household spending and economic growth. The government also eliminated import duties on key mobile phone components and introduced long-term agricultural initiatives to strengthen domestic production.
Finance Minister Nirmala Sitharaman said the revised tax structure would benefit the middle class by increasing disposable income, encouraging savings and investment. “The new structure will substantially reduce the taxes of the middle class and leave more money in their hands, boosting household consumption, savings, and investment,” she told Parliament while presenting the annual budget.
The tax-free income threshold has been nearly doubled from Rs 700,000 ($8,400) to Rs 1.2 million ($14,500). Those earning between Rs 1.6 million and Rs 2.4 million ($19,200 to $28,900) will now pay a reduced tax rate of 20-25 percent, down from 30 percent.
Sitharaman noted that the tax changes would result in the government foregoing Rs one trillion ($12 billion) in revenue. India’s fiscal deficit for this year is projected at 4.8 percent of GDP, lower than last year’s 4.9 percent projection.
The budget also removed import duties on certain mobile phone components to support domestic production. India, now the world’s second-largest mobile phone manufacturer, aims to strengthen its position in global supply chains.
Agricultural initiatives include a six-year program to increase pulse crop production and measures to improve cotton yields. State agencies will procure pigeon peas, black matpe, and red lentils at guaranteed prices to reduce import dependence.
The stock market showed limited reaction to the announcements. The benchmark Nifty index, which initially rose during Sitharaman’s speech, was trading 0.19 percent lower by the afternoon in a special budget session.
