The Federation of of Indian Chambers of Commerce and Industry (FICCI) has suggested that the finance ministry slash the highest personal income tax rate from 30 per cent to 25 per cent in the forthcoming budget in order to boost consumer spending.
At a pre-budget meeting with revenue secretary P V Bhide, a FICCI delegation comprising its president Harsh Pati Singhania and Bharti Enterprises vice chairman and MD Rajan Mittal suggested a minimum 5 per cent reduction in the top personal income tax slab in order to revive demand and reverse the negative growth in industry.
The maximum rate of 30 per cent income tax rate applies to high-spenders with incomes over Rs5 lakh per annum and a reduction in the tax rate on the top slab would leave enough cash in the hands of the consumer to encourage consumption, FICCI said.
In fact, FICCI has suggested that the top rate of 30 per cent income tax should apply to income slabs over Rs10 lakh.
Corporate income tax is also fixed at 30 per cent.
Besides, the delegation demanded incentives for investments in agriculture and extension of tax benefits for the housing, telecom and power sectors. It also suggested the introduction of investment allowance and restoration of depreciation rate of 25 per cent in order to boost investment.
FICCI also sought a reduction in customs duty on natural rubber from the current level of 20 per cent to 7.5 per cent and a reduction of central sales tax from 2 per cent to 1 per cent.
The apex industry chamber suggested that the government continue the excise duty and service tax at the reduced rates of 8 per cent and 10 per cent, respectively, even as it admitted that the government has little scope for more tax sops considering the weak financial position.