The current basic income tax exemption limit of Rs 2.5 lakh is unlikely to be raised in the forthcoming full Budget 2019-20, according to informed sources, as the Finance Ministry has already announced a provision whereby individuals earning up to Rs 5 lakh can get full tax rebate under Section 87A.Also Read - 7th Pay Commission Latest News: Karnataka Govt Employees to Get 4.75% DA Hike Ahead of Diwali
Those earning Rs 5 lakh per annum will, however, be required to file tax returns even if they have zero tax liability. Also Read - Direct Tax Target Realistic, Achievable: Revenue Secretary Ajay Bhushan Pandey
There is a huge expectation from the new Finance Minister of an increase in the basic exemption limit from Rs 2.50 lakh to Rs 5 lakh. Also Read - 50 Days of Modi 2.0: NDA's Second Term Indicates Huge Transformation For Next 5 Years
Though there is an expectation among the salaried class that the Modi 2.0 government would reward them for voting it to power, officials in New Delhi have earlier said that increasing the basic exemption limit to Rs 5 lakh will defeat the purpose of the interim budget announcement.
According to them, increasing the basic exemption limit will not require many people to file income tax and it could result in a dip in tax filing, and would even defeat the purpose of expanding the tax base.
Tax experts have suggested to the Finance Minister in their pre-Budget meeting that raising the basic income tax exemption level would not prove to be a wise move since the Narendra Modi-led government’s focus has been on increasing the country’s taxpayer base.
There is also little possibility that the government would tweak the existing tax slabs in a way that a 10 per cent tax rate applies to those earning up to Rs 10 lakh, instead of the existing 20 per cent.
Sources said there could be some additional tax-saving measures for salaried individuals.
Income tax collections have been lower than expected which also does not support any possibility of raising the exemption limit.
Sources also said that there is no possibility of the threshold for the highest 30 per cent tax rate being raised to apply to incomes above Rs 15 lakh in the upcoming Budget but could happen in future years.
The Finance Ministry is not only looking to increase the taxpayer base but also wants to increase revenue from taxes as it needs to invest aggressively to revive growth and consumption. Therefore, there are minimum chances that the government would tinker with income tax rules in the upcoming budget.