Govt looking to hike I-T exemption limit to Rs.5 lakh
Finance standing panel under Yashwant Sinha had suggested slab changes
NEW DELHI, JUNE 13:
The upcoming
Budget may put more money in people’s pockets as the Modi Government is
considering raising the income tax limit and tinkering with the existing
tax slabs.
Indications are
that the exemption limit will be raised to Rs.5 lakh from the
current Rs.2 lakh; meaning, people earning Rs.5 lakh or less annually
will not have to pay tax.
Currently, tax
is levied at the rate of 10 per cent on income of Rs.2-5 lakh, 20 per
cent on income of Rs.5-10 lakh and 30 per cent on income
above Rs.10 lakh (see table).
Education cess
Further, there is an education cess and an additional surcharge at the rate of 10 per cent on income exceeding Rs.1 crore.
The previous
Government had rejected the suggestion of the last Standing Committee on
Finance, headed by senior BJP leader Yashwant Sinha, that the I-T
exemption ceiling be raised to Rs.3 lakh.
The panel had
recommended nil tax for income up to Rs.3 lakh, 10 per cent for income
of Rs.3-10 lakh, 20 per cent for Rs.10-20 lakh and 30 per cent
for income beyond Rs.20 lakh.
However, the
Ministry had said that the total revenue loss on account of the changes
and removal of cess would work out to around Rs.60,000 crore.
Pros and cons
The argument in
favour of changing the structure is that it would put more money in the
hands of people and, in turn, raise demand for various goods and
services, boosting the manufacturing and services sectors.
At the same
time, more consumption would also result in higher collection of
indirect taxes, which would compensate the fall in income-tax
collection.
While some feel
that more money in the hands of people will also help them combat
inflation, economists believe that more money in circulation may
actually fuel inflation.
Source : http://www.thehindubusinessline.com/
