Jigar M. Patel
International Tax Attorney
Income-tax is no longer as Taxing!
In FY 2009-10, the basic personal income-tax exemption limit was just Rs. 1.5 lakhs and taxable income exceeding Rs. 5 lakhs attracted the maximum tax rate of 30%. The average tax rate on taxable income of Rs. 24 lakhs worked out to 26% (refer Table-2 annexed).
Today, in FY 2025-26, the exemption limit stands hiked to Rs. 4 lakhs and the threshold limit for the max-tax rate of 30% raised up to Rs. 24 lakhs. Under the present scenario, the average tax rate for individuals, HUFs, AOP/BOI on the taxable income of Rs. 24 lakhs has come down to a dream figure of just 12.50%. For sake of simplicity, the max-tax rate referred above represents the peak rate of income-tax without considering the incidence of Cess or Surcharge on income-tax.
Unprecedented Bonanza of Tax Reliefs
Resident individual taxpayers with total income below Rs. 12 lakhs, have been granted the added luxury of zero tax status with reference to their normal income, through the tax rebate of upto Rs. 60,000.
All personal taxpayers inclusive of individuals, HUFs, AOP/BOI with taxable incomes above Rs. 24 lakhs will enjoy an annual tax bonanza of Rs. 1,10,000. Astonishingly, this singular tax relief works out to more than the cumulative tax reliefs granted by the FM in her eight consecutive budgets.
Amazing Rise in Personal Income-tax Collection
Personal income-tax collection in FY 2009-10 stood at Rs. 1,22,370 crores (refer Table-1 annexed), against the gross tax revenue of Rs. 6,24,528, working out to just 19.60%.
Fifteen years down the line this figure has grown over 10 times to Rs. 12,57,000 crores. This figure of personal income tax collection to the gross tax revenue of Rs. 38,53,455 crores works out to 32.60% in FY 2024-25.
No wonder, this healthy growth in the personal tax revenues has emboldened the Finance Minister in gifting this unprecedented tax bonanza of Rs. 1 lakh crores by way of personal income tax reliefs while presenting Union Budget 2025.
It is also heartening to note that the combined contribution of personal and corporate income-tax of Rs. 25,20,000 crores constitutes 59% of the budgeted gross tax revenue collection of Rs. 42,70,233 crores for FY 2025-26.
| TABLE – 1 PERSONAL INCOME TAX COLLECTIONS IN INDIA | |||
| Financial Year | Personal Income Tax Collection (in Rs. Crores) | Basic Exemption Limit (in Rs.) | *Threshold Limit for Maximum Tax Rate (in Rs.) |
| 2009-10 | 1,22,370 | 1,50,000 | 5,00,000 |
| 2014-15 | 2,58,326 | 2,00,000 | 10,00,000 |
| 2019-20 | 4,92,593 | 2,50,000 | 10,00,000 |
| 2024-25 | 12,57,000 (Revised Estimates) | 3,00,000 | 15,00,000 |
| 2025-26 | 14,38,000 (Budget Estimates) | 4,00,000 | 24,00,000 |
*Maximum Personal Income-tax Rate (excluding Cess & SC) has remained 30%
| TABLE – 2 IMPACT OF PERSONAL TAX RELIEFS Sliding Average Tax Rates during the past 15 Years | |||
| Financial Year | Taxable Income | Income-tax | Average Tax Rate |
| 2009-10 | 24,00,000 | 6,24,000 | 26.00% |
| 2014-15 | 24,00,000 | 5,45,000 | 22.71% |
| 2019-20 | 24,00,000 | 5,32,500 | 22.19% |
| 2024-25 | 24,00,000 | 4,10,000 | 17.08% |
| 2025-26 | 24,00,000 | 3,00,000 | 12.50% |
