Government considering personal tax rate cuts to boost consumption, sources say

Potential tax cuts for middle-class Indians to boost consumption and savings in the economy, as government plans budget changes.

The government is considering lowering personal tax rates for certain categories of individuals, which could help boost consumption in the Asia's third-largest economy, two government sources told Reuters.

The plan could be announced in July, when Prime Minister Narendra Modi's government presents the first federal budget after his Bharatiya Janata Party (BJP) failed to win a majority on its own.

A post-poll survey showed that voters were worried about inflation, unemployment and decreasing incomes.

While the Indian economy grew at a world-beating 8.2% in 2023-24, consumption has grown at half that pace.

Prime Minister Modi, while staking a claim to form the National Democratic Alliance ruled government, had said his administration would focus on raising middle-class savings and improving the quality of their lives.

A cut in personal tax could boost consumption in the economy and increase savings for the middle class, the sources said, declining to be identified as budget discussions are confidential.

India's finance ministry did not immediately respond to an email seeking comment.