- Government reportedly contemplating to hike personal tax exemption limit
- Slabs should be enhanced for benefit of low income group: industry body
- Move to help tide over impact of increasing retail inflation, adds CII
The proposal before the ministry is to hike the tax exemption limit from the existing Rs 2.5 lakh per annum to at least Rs 3 lakh if not 5 lakh, they said.
Besides, the tinkering of tax slabs is also being actively considered by the ministry to give a substantial relief to the middle-income group, especially the salaried class, to help them tide over the impact of retail inflation, which has started to inch up.
In the last Budget, Finance Minister Arun Jaitley left the tax slabs unchanged but gave a marginal relief to small taxpayers by reducing the rate from 10 per cent to 5 per cent. This was for individuals having an annual income between Rs 2.5 lakh and Rs 5 lakh.
In the next Budget to be unveiled on February 1, the government could lower the tax rate by 10 per cent on income between Rs 5 lakh and Rs 10 lakh, levy a 20 per cent rate for those with income between Rs 10 lakh and Rs 20 lakh and 30 per cent for income beyond Rs 20 lakh.
At present, there is no tax slab for income between Rs 10 lakh and Rs 20 lakh.
"Considering the steep rise in cost of living due to inflation, it is suggested that basic limit for exemption and other income slabs should be enhanced to give benefit to low income group. The income trigger for peak rate in other countries is significantly higher," industry chamber CII (Confederation of Indian Industry) said in its pre-Budget memorandum to the finance ministry.
Although the industry chambers want the government to reduce the peak tax slab to 25 per cent, it is unlikely that the ministry will agree to that due to pressure on fiscal deficit.
The government recently raised borrowing target by additional Rs 50,000 crore for the current fiscal year to meet the shortfall.
According to industry body Ficci, there is a likelihood that demonetisation effects may linger on for some more months and hence there is a need to further boost demand and therefore, the government should consider revision of income tax slabs, by raising the income level on which peak tax rate would trigger.
"This would improve purchasing power and create additional demand. For individual taxpayers, 30 per cent tax rate should be applicable only if the income is above Rs 20 lakh. Additionally, interest rates should be lowered to enable affordable finance for conducting business operation and expansion," it said.
Among other things, the chambers have suggested reintroduction of the standard deduction for salaried employees to at least Rs 1 lakh to ease the tax burden, keeping in mind the rate of inflation and purchasing power of the salaried individual, which is dependent on salary available for disbursement.
Standard deduction, which was available to the salaried individuals on their taxable income, was abolished with effect from assessment year 2006-07.
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