(Bloomberg) -- India will forego 350 billion rupees ($4.28 billion) in revenue by raising the cap on income tax exemption and cutting rates, Finance Minister Nirmala Sitharaman said as she presented the annual budget on Wednesday.
The government will lift the exemption bar to up to 700,000 rupees a year from a previous threshold of 500,000 rupees as it cut the maximum income tax rate to 39% and reduced the highest surcharge to 25% from 37%.
“Now I have come to what everyone is waiting for — personal income tax,” Sitharaman said, receiving loud cheers from lawmakers who asked to repeat the announcement “once more”.
The finance chief said the new tax regime will now be the default tax regime, but that people can still opt to avail of the benefits of the old tax structure that allows more exemptions.
So far she has mostly given to everyone — from taxpayers to farmers to women to senior citizens. But everything comes at a cost. Narrowing the fiscal deficit to 5.9% of GDP won’t be possible if the finance minister isn’t taking away from another hand or another section. Details might come in the budget fineprint.
Meanwhile, the tax bonanza has given a treat for stocks, which are on a rampage. The benchmark Sensex climbed as much as 2% to 60,730. The rupee too, is up 0.2%, while bond yields are down 4 bps to 7.30%
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--With assistance from Adrija Chatterjee, Ronojoy Mazumdar and Menaka Doshi.
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