Steep cut in tax won’t be rolled back, FM tells LS
Tax collections have been increasing year-on-year, she said adding that the ₹1 lakh crore forgone has been factored in while fixing the budget estimate (BE) for 2025-26.
New Delhi Union finance minister Nirmala Sitharaman assured the Lok Sabha on Tuesday that the steep reduction in personal income-tax for the middle class would not be rolled back in the future, noting that the government has carefully factored in the ₹1 lakh crore outgo while estimating revenue for 2025-26, which includes a 13%-plus projected growth in personal income tax collection.
“I can only say, if you look at the track record, even during Covid, we did not raise tax.” Therefore, she added, the element of suspicion was ill-founded. The budget for FY26, raised the income tax rebate from ₹7 lakh to ₹12 lakh per annum. For the salaried class, this means someone earning a salary of ₹12.75 lakh a year, will pay no tax ( after factoring in the standard deduction). The move will cost about ₹1 lakh crore to the exchequer in 2025-26.
Replying to queries raised by Members of the Parliament (MPs) in the house during the discussion on the Finance Bill 2025, she said the personal income-tax relief was extended in the budget after factoring in “considerable buoyancy” in collections of income-tax in last few years.
Tax collections have been increasing year-on-year, she said adding that the ₹1 lakh crore forgone has been factored in while fixing the budget estimate (BE) for 2025-26. The personal income-tax projection in the budget estimate (BE) of 2025-26 is ₹13.60 lakh crore, while the revised estimate (RE) for 2024-25 is ₹12.20 lakh crore.
Speaking on the issue of privacy, in the context of certain provisions of the new IT bill, Sitharaman said in cases of search and seizure authorized by the competent authority, the officer may also gain access to the computer system as per the existing law. But, the Income Tax Act 1961 does not specifically mention the digital devices, besides books of account, ledgers and other manual records showing income and expenditure, she added.
“Since the 1961 Act does not mention the digital, most often it becomes contentious. People go to the court.” This gap has been filled in the New Income-Tax Bill, the minister said. She added that the New Income-Tax Bill, which aims to reduce compliance burden, is not part of the Finance Bill 2025.
The New Income-Tax Bill is with the select committee for a review and expected to be taken up for discussion in the Monsoon session of the Parliament, Sitharaman told the Lok Sabha.
Some of the key changes in the bill include reorganising major tax exemptions into distinct schedules for better clarity, elimination of the concepts of ‘previous year’ and ‘assessment year’ in favour of ‘tax year’ and a clear definition of virtual digital assets (VDAs) along with taxability on income from crypto-assets, including cryptocurrencies.
Highlighting the key features of the Finance Bill 2025, Sitharaman said the government has been rationalising customs duty to make inputs cheaper for the domestic industries, thereby promoting local manufacturing and exports.
Speaking on an amendment regarding the abolition of the 6% equalisation levy on online advertisements (the so-called Google Tax), the finance minister said it was done to address “uncertainty in the international economic conditions”.
