NEW DELHI, India (UPDATED) – India is to halve the basic rate of income tax to 5%, Finance Minister Arun Jaitley announced on Wednesday, February 1, in his annual budget.
Jaitley said the move would ease the burden of the government's shock decision last year to ban high-value banknotes to combat widespread corruption. It would also encourage more people to pay tax.
"The present burden of taxation is mainly on the taxpayer and the salaried employees who are showing their income correctly," he told parliament.
"Therefore post-demonetization, there is a legitimate expectation of this class of people to reduce their burden of taxation.
"Also an argument is made that if nominal rate of taxation is kept at a lower slab, more people will prefer to come in the tax rate."
The basic rate applies to those with annual incomes of between 250,000 rupees ($3,701) and 500,000 rupees and will fall from 10% to 5% from April, he said.
Prime Minister Narendra Modi's surprise currency decision removed around 86% of India's available cash at one stroke, triggering massive queues outside banks as the authorities struggled to print enough new notes.
The abrupt shortage of high-value notes hit businesses across the country, especially in cash-intensive sectors like agriculture, real estate and jewellery. – Rappler.com