FINANCE MINISTER  DEFENDS TAX RELIEF AMID OPPOSITION CRITICISMS

Why in the news?

Finance Minister Nirmala Sitharaman defends tax relief measures for the middle class amid opposition criticism, highlighting increased deductions and liberalised income tax slabs while addressing concerns over corporate tax disparities.

About Tax Relief Measures for Middle Class:

  • Finance Minister’s Statement:
    • Nirmala Sitharaman addressed concerns in the Lok Sabha about tax relief for the middle class.
    • Claimed significant liberalisation of personal income tax slabs in 2023, reducing liabilities by ₹37,500.
    • Enhanced family pension deduction from ₹15,000 to ₹30,000.
    • Raised employer’s contribution deduction from 10% to 14%.
source:slideshare
  • Opposition Criticisms:
    • Opposition alleges the government has shifted the tax burden to the middle class.
    • Criticisms include claims that corporate taxes are less compared to personal income taxes.
    • Opposition MPs walked out after an amendment on GST rates for insurance premiums was not addressed.
  • Corporate Tax Issues:
    • Sitharaman disputed the narrative that corporate taxes are lower than personal income taxes.
    • Highlighted that dividend income is taxed as part of corporate profits.
About Taxation in India:

  • Definition: Taxation is an involuntary financial obligation imposed by authorities (government) on citizens, residents, and entities.
  • Purpose: Serves as a tool for income redistribution.
  • Recommendation: The Swaran Singh Committee proposed including the duty to pay taxes in Fundamental Duties under Article 51A.
  • Current Status: This recommendation was not adopted; hence, the duty to pay taxes is not a Fundamental Duty.

Types of Taxation in India:

Direct Tax

  • Incidence and impact fall on the same entity.
  • Examples: Income Tax, Corporation Tax.
  • Paid directly by individuals or organisations.

Indirect Tax

  • Incidence and impact do not fall on the same entity.
  • Can be shifted from one person to another.
  • Examples: Sales Tax, Entertainment Tax, Excise Duty.