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India Finance Minister Nirmala Sitharaman presented the Indian Union Budget in the Lok Sabha in Delhi on February 1, 2025.

The author will write detailed comments on the same in following articles; however, this particular article is about the revolutionary step taken with respect to tax on salaried individuals. This shows the wisdom, farsightedness, fairness and equity of the Indian tax regime. There has been a substantial reduction in the tax charge for salaried individuals.

The table shows that there is no tax on salary income up to Indian Rs 1.2 million per annum. The tax rate for the salary of Indian Rupees 5 million per annum will be around twenty (20) percent.

As against that the tax in Pakistan on any salary income above Rs 600, 000 per annum is 5 percent whereas any income above Rs 4.1 million per annum is taxed at the rate of 35 percent.

The rate of exchange of Pakistan Rupee on February 1, 2025 is Rs 280 to USD 1. In India, it is Indian Rupee 87 to USD 1. This means that if the $ to $ rate of tax is taken into account then salary income up to Pakistan Rupees 3.6 million has been exempted from tax. This is around six times less than the tax in Pakistan. The same is the case with regard to higher brackets.

The comments on this revolutionary step in India are as under:

“Tax experts, industry observers, and banking leaders have lauded the Union Budget 2025-26 for increasing the exemption limit to Rs 12 lakh annually.

For salaried taxpayers, this threshold increases to Rs 12.75 lakh, factoring in a Rs 75,000 standard deduction,“. Sameer Gupta, National Tax Leader, EY India, said. “The enhanced tax rebates will ensure more disposable income, stimulating consumption and fueling economic activity,” he added.

Debadatta Chand, Managing Director and CEO of Bank of Baroda, noted the impact on consumer spending. “The concessions on the income tax front will put more money in the hands of taxpayers and would boost consumption in the economy,” he said.

Tribhuwan Adhikari, MD and CEO of LIC Housing Finance, said, “The exemption of income tax for earnings up to INR 12 lakh will significantly impact affordable housing demand, making it easier for individuals to plan homeownership.”

Whatever has been said by Indian experts is simple economics. The primary question which arises after this budget is where Pakistan is going and would we be able to retain talent in Pakistan with this un-absorbable tax rate of salaried people?

This author is of the view that we have lost the battle of rationality in our tax regimes for the reason that the state has no writ to tax retail and wholesale trade, agriculture sector income, real estate transactions, etc. The only recourse available for the government is to increase the tax rate for those who are already in the tax system, mainly being salaried income. This step of Narendra Modi’s government reflects the fact that it is fully aware of the real strength of India, which is manpower.

The same is the case in Pakistan; however, our policymakers are not interested in any sustainable economics for the country. They are only interested in collecting taxes to meet the target of the IMF.

Copyright Business Recorder, 2025

Comments

200 characters
Ahmad Feb 04, 2025 11:37am
Policy makers are namesake. IMF approval is required for everything. Since there's no sight of getting out of IMF program (rehab). No point in discussing about other country's policies.
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