PHD Chamber of Commerce and Industry’s (PHDCCI’s) new president Sanjay Aggarwal on Sunday said the next Budget should lower the maximum income tax (I-T) rate to around 25 per cent from the current 30 per cent plus surcharges.
“In the current scenario, there is a need to increase the disposable income of people by reforming the direct tax structure. The maximum personal income tax rate should be around 25 per cent to increase the personal disposable income. This will boost demand in the economy,” Aggarwal, who is chairman and chief executive officer (CEO) of Paramount Cables, said.
His comment was in contrast to economist Joseph Stiglitz’s, who wanted the rich to be taxed more under the current circumstances.
Currently, an annual income of over Rs 10 lakh attracts 30 per cent tax, besides education and health cess of four per cent under the old regime. If an assessee chooses the new scheme of less exemptions, annual income of over Rs 15 lakh attracts 30 per cent tax. Besides, there are surcharges if annual income is above Rs 50 lakh. These go up to 37 per cent of the tax rate depending upon the amount of income.
Aggarwal said focus of the Budget should be on prioritising infrastructure development, inducing flow of investments and creating a conducive as well as attractive business environment for companies looking to shift businesses from other countries to India.
Besides, the Budget should enhance the competitiveness of India’s services & manufacturing sectors and raise expenditure on education and health with a long-term vision of building Atmanirbhar Bharat.
“The lockdown restricted the demand for MSME products. The disruption in supply chain hit the prices of raw materials, increasing the cost of production. This and lower cost margins impacted MSME cash flows,” he said.
Also, as a result of payment delays, businesses, especially MSMEs, have been facing financial hardships and liquidity constraints. This led to severe pressure on their working capital management, Aggarwal pointed out.
He said the package announced by the government for MSMEs has benefited them immensely and this should continue.
There should be special efforts to pro-actively implement the Centre’s instructions to PSUs and government departments to urgently release all payments to MSMEs, he added.