India Budget 2010: Income Tax Rates will Please the Middle Class

It is perhaps a bit difficult to give the definition of the Middle Class in India. However, I am sure that the income tax rates announced in union budget 2010 will please the middle class people. Before anything let me give you the rates of income tax in India from now:

Until 160,000 rupees: 0%

160,000 to 500,000 rupees: 10%

500,000 to 800,000 rupees: 20%

Over 800,000 rupees: 30%

I think that the largest beneficiary will from the income group of 500,000 to 800,000 rupees. The new rates will save them a lot of money each year. The main goal is to encourage people to consume more. Also, Indian government perhaps wants that people feel more encouraged to pay tax and not try to evade it.

Indian economy is gradually coming out of the recession. Now, the companies would want that people try to consume more and this way the economy against gets rolling. The government also wants the same thing.

I am just concerned about the poor people. Most people in India do not earn 160,000 rupees per year. 

Rising trend is becoming visible in tax collection in India

Indian government’s direct tax collection rose 17% in May 2009 to Rs. 11,919 crore (1 crore = 10 million). In April 2009, tax collection contracted 3.19% to Rs. 12,239 crore against Rs. 12,642 crore in the same period in FY 2007-2008. Following a 18.6% decline in February 2009, tax collection grew 0.92% in March 2009. Government would be able to get a better understanding of the current trend after advance tax payments in June. In July, the newly elected Indian government is going to present its first budget.

Here are some of the highlights of the ongoing tax collection trends:

• Despite, the instant surge in share prices immediately after the Indian Congress led UPA came to power, Securities Transaction Tax collection declined 24.75% to Rs. 795 crore in May 2009 against Rs.1057 crore in May 2008.
• Fringe Benefit Tax declined 5.57% to Rs. 103 crore against Rs. 109 crore in April-May 2008.
• Due to fast processing of returns, refund outgo in April-May improved significantly.
• In April-May refunds to non-corporate tax-payers grew 61.7% to Rs. 2149 crore against Rs. 1329 crore in the same period last year.
• Corporate tax collection in April May increased 5.56% to Rs. 8,578 crore from Rs. 8126 crore.
• Personal income tax grew 5.92% to Rs. 15,559 crore against 14,960 crore in the same period last year.

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The Economic Times