Budget 2026: Reduce income tax rate for individuals earning up to Rs 50 lakh, PHDCCI urges Govt

The industry body PHDCCI made a case on Wednesday for substantially reducing the income tax rates for individuals earning up to ₹50 lakh annually, and levying the highest rate of 30 per cent only on those earning more.

Current income tax structure

The highest tax rate of 30 per cent is levied on individuals earning more than ₹24 lakh in a year in the new income tax regime.

In its pre-Budget recommendations submitted to Revenue Secretary Arvind Shrivastava, the industry chamber made several recommendations on the indirect taxation front, in addition to a raft of reforms in the direct tax regime.

Proposal for reduction in taxation rates

One of the major suggestions on the direct taxes front is "request for reduction in rates of taxation for individuals, partnership firms and limited liability partnership".

PHDCCI said the corporate tax rates have been reduced to 25 per cent, including surcharge.

"Despite the fall in corporate tax rate from 35 per cent (approx) to 25 per cent, the corporate tax collections have increased from ₹6.63 lakh crore in 2018-19 to ₹8.87 lakh crore in 2024-25, thereby showing a substantial increase.

"This clearly shows that moderation of tax rates has resulted in more compliance and an increase in tax revenues," it argued.

High personal tax burden

It further said the personal tax rates have the highest slab of 30 per cent, and with surcharge ranging from 5 per cent to 25 per cent, the peak of tax rate reaches 39 per cent in some cases.

"The taxpayer is burdened with this high tax rate where 40 per cent of his/her income goes to the government and the balance 60 per cent is left for self-consumption," the chamber said.

Suggested new tax slabs

In the representation, the chamber also highlighted the benefits and facilities that taxpayers get in developed countries.

"...it is requested that the maximum tax rate for income up to ₹30 lakh should be 20 per cent and from ₹ 30 lakh to ₹ 50 lakh should be 25 per cent and beyond ₹ 50 lakh it could be 30 per cent which will not only increase compliance and tax buoyancy but also lead to major relief to the middle class," it said.

Reintroduction of Section 115BAB

PHDCCI said that to promote the setting up of new manufacturing units in India, it is very important to reintroduce Section 115BAB of the Income Tax Act, wherein a concessional rate of corporate tax of 15 per cent plus surcharge was introduced for new manufacturing units complying with certain conditions.

Section 115BAB of the Income Tax Act was introduced in September 2019, allowing a concessional rate of income tax of 15 per cent plus surcharge in respect of new companies that start manufacturing up to March 31, 2023, which was later extended to March 31, 2024.

"A concessional rate of tax of 15 per cent would provide as a major incentive for foreign companies to set up subsidiaries in India and invest in manufacturing units and this could help in growth of the economy, job creation and could result in India being one of the major manufacturer of goods in the world," the chamber said in its representation to the finance ministry.

Other direct tax suggestions

Other suggestions relate to taxation of buy-back of shares, payment to MSMEs, TDS/TCS certificate requirement, presumptive tax scheme, and deduction against dividend income.

It further said input tax credit (ITC) should be made available on advance payments for services after payment of GST, even before receipt of the tax invoice.

It also made a case for enabling the refund of GST Compensation Cess to Duty Free Operators (DFS) for "Made in India" goods sold through DFS from the Departure area of international airports.

The industry body also recommended that companies with multiple locations and distinct GST registrations (in the same or different states) should be allowed to transfer ITC between units linked to the same PAN.