Tuesday, 9 January 2018

Tax exemption limit may be raised from Rs 2.5 lakh to Rs 3 lakh. Some Relief

Middle class can hope for a big relief in 2018-19 Budget, which will also be the last regular budget of the NDA government, as the finance ministry is contemplating to hike personal tax exemption limit and tweak the tax slabs, according to sources.
The proposals 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 slab is also being actively considered by the ministry to give substantial relief to middle-income group, especially the salaried class, to help them tide over the impact of retail inflation, which has started inching up.

In the last Budget, Finance Minister Arun Jaitley left the slabs unchanged but gave marginal relief to small tax payer by reducing the rate from 10 per cent to 5 per cent for individuals having annual income between Rs 2.5-5 lakh.

In the next Budget to be unveiled on February 1, the government could lower tax rate by 10 per cent on income between 5-10 lakh, levy 20 per cent rate for income between Rs 10-20 lakh and 30 per cent for income beyond Rs 20 lakh.

At present, there is no tax slab for income between 10-20 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 said in its pre-Budget memorandum to the finance ministry.

Although the industry chambers want the government to reduce peak tax slab to 25 per cent, it is unlikely that the ministry will agree to that due to pressure on fiscal deficit.

The subdued indirect tax collection following roll out of Goods and Services Tax from July 1 last year has put pressure on the fiscal deficit, which has been pegged at 3.2 per cent of the GDP for 2017-18.

The government recently raised borrowing target by additional Rs 50,000 crore for the current fiscal to meet the shortfall.

Sourced From Times Of India