Tax panel recommends sharp cuts in personal income tax to spur demand

The panel tasked with drafting a new legislation on direct taxation has recommended a radical cut in current income tax slabs to spur demand by putting more money in the hands of consumers, people familiar with the matter told CNBC-TV18.

The panel, which submitted a report with these recommendations on August 19, 2019,  proposed a 10 percent income tax rate for individuals earning between Rs 5 and 10 lakh per year against the current rate of 20 percent. Individuals earning over Rs 20 lakh per year should be taxed at 30 percent and those earning over Rs 2 crore a year must pay 35 percent as income tax, according to the panel's recommendations.

Currently, individuals earning income between Rs 2.5 lakh and Rs 5 lakh are taxed at 5 percent. Income between Rs 5 lakh and Rs 10 lakh is taxed at 20 percent and more than Rs 10 lakh a year is subjected to the income tax slab of 30 percent.