Cut income tax for up to Rs 50 lakh income to 20%, industry body urges govt

PHDCCI has urged the government to lower personal income tax rates for those earning up to Rs 50 lakh and restore the 15% concessional tax for manufacturers

Industry body PHD Chamber of Commerce and Industry (PHDCCI) has called for a major cut in personal income tax rates for individuals earning up to Rs 50 lakh annually, saying the highest rate of 30 per cent should only apply to those earning above that threshold.

 

At present, the top rate of 30 per cent is levied on those earning more than Rs 24 lakh per year under the new tax regime.

 

Chamber submits pre-Budget suggestions

 

In its pre-Budget submission to Revenue Secretary Arvind Shrivastava, PHDCCI proposed a series of reforms in both direct and indirect taxes ahead of the Union Budget, which Finance Minister Nirmala Sitharaman will present in Parliament in February.

 

One of its key suggestions concerns lowering direct tax rates for individuals, partnership firms, and limited liability partnerships.

 

“The corporate tax rates have already been brought down to 25 per cent, including surcharge,” the chamber said in its representation.

 

Link between lower rates and higher compliance

 

PHDCCI pointed out that even after the reduction in corporate tax rates from roughly 35 per cent to 25 per cent, tax collections rose from Rs 6.63 lakh crore in 2018–19 to Rs 8.87 lakh crore in 2024–25.

 

“This clearly shows that moderation of tax rates has resulted in more compliance and an increase in tax revenues,” the chamber said.

 

It argued that the highest personal tax slab currently reaches up to 39 per cent in some cases once surcharges are added, leaving taxpayers with limited disposable income.

 

“The taxpayer is burdened with this high tax rate where 40 per cent of his or her income goes to the government and the balance 60 per cent is left for self-consumption,” said PHDCCI.

 

Suggested new Income Tax slabs

 

The industry body has suggested new personal income tax slabs as follows:

 

Up to Rs 30 lakh: 20 per cent

Rs 30 lakh to Rs 50 lakh: 25 per cent

Above Rs 50 lakh: 30 per cent

 

According to PHDCCI, such a structure would bring relief to middle-income earners, boost compliance, and enhance tax buoyancy.

 

Call to restore concessional tax for manufacturers

 

PHDCCI also urged the government to reintroduce Section 115BAB of the Income Tax Act, which offered a concessional 15 per cent corporate tax rate to new manufacturing units. The provision, first introduced in September 2019, applied to firms commencing production by March 31, 2024.

 

“A concessional rate of 15 per cent would serve as a strong incentive for foreign companies to set up subsidiaries in India and invest in manufacturing units,” the chamber said. “This could support economic growth, job creation and help position India as a major global manufacturer.”

 

Indirect tax proposals

 

On the indirect tax side, PHDCCI has recommended:

 

• Making faceless assessment and audit mandatory, similar to the system under the Income Tax Act.

• Allowing input tax credit (ITC) on advance payments for services once GST is paid, even before receiving the tax invoice.

• Enabling refund of GST Compensation Cess to Duty Free Operators for “Made in India” goods sold at international airports.

• Permitting companies with multiple GST registrations across states to transfer ITC between units under the same PAN.

 

The chamber’s memorandum also covered issues relating to the taxation of share buybacks, MSME payments, TDS/TCS certification, presumptive tax schemes, and dividend income deductions.