Middle class likely to get tax relief in upcoming Budget
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 2,50,000 per annum to at least Rs 3,00,000 if not Rs 5,00,000, 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 2,50,000 and Rs 5,00,000.
In the next Budget to be unveiled on February 1, the government could lower tax rate by 10 per cent on income between Rs 500,000 and Rs 1,000,000, levy 20 per cent rate for income between Rs 1,000,000 and Rs 2,000,000 and 30 per cent for income beyond Rs 2,000,000.
At present, there is no tax slab for income between Rs 10,00,000 and Rs 20,00,000. “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 preBudget 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 (GST) 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 201718.The government recently raised borrowing target by additional Rs 500 billion for the current fiscal to meet the shortfall
According to industry body Ficci, there isalikelihood that demonetisation effects may linger on for some more months and hence there isaneed 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 ~2,000,000. Additionally, interest rates should be lowered to enable affordable finance for conducting business operation and expansion,” it said.
Among other things, chambers have suggested reintroduction of the standard deduction for salaried employees to at least Rs100,000 to ease the tax burden of them and 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 200607.
In the next Budget to be unveiled on February 1, the government could lower tax rate by 10 per cent on income between Rs 5,00,000 and Rs 10,00,000, levy 20 per cent rate for income between Rs 10,00,000 and 20,00,000 and 30 per cent for income beyond Rs 20,00,000
The Business Standard, New Delhi, 10th January 2018