New Delhi: In what may come as good news for taxpayers in the 2019 Interim Budget, the government is likely to double the income tax (I-T) exemption threshold for salaried taxpayers from the present Rs 2,50,000 to Rs 5,00,000.Also Read - Parliament's Budget Session To Begin On January 31, Union Budget To Be Tabled On February 1 | All You Need To Know
Also, the government may reinstate tax-free status for medical expenses and transport allowances, providing some relief to the middle class already under strain since demonetisation. Also Read - Padma Shri Award 2021: Kangana Ranaut, Karan Johar Among 119 Recipients This Year
At the moment, income up to Rs 2.5 lakh is exempt from personal income tax. Income between Rs 2.5-5 lakh attracts 5 per cent tax (see table), while that between Rs 5-10 lakh is levied with 20 per cent tax. Income above Rs 10 lakh is taxed at 30 per cent. Rs 5 lakh exemption is only applicable to individuals of over 80 years. Also Read - Budget 2022: Interesting Facts About Indian Budget And How It Changed Over The Years
Also, tax free medical expenses up to Rs 15,000 and transport allowance up to Rs 19,200 per annum has been replaced with a Rs 20,000 standard deduction for those earning above Rs 5 lakh last year. This will benefit tax payers to the tune of Rs 12,500 annually which is not much but can be viewed as a sentiment buster.
A fatigued BJP dispensation realises that as the incumbent it will have to fight off varied challenges.
With acute farm distress, middle class backlash, massive spike in unemployment data and rising Dalit anger taking its toll on the BJP, it would like to unleash a slew of course correctives. The 10 percent quota for upper castes was part of this process to appease vote banks. But this was an executive decision adopted by parliament, tinkering with the tax structure similarly is a legislative decision.
Income Tax Slabs for Individual Tax Payers & HUF (Less Than 60 Years Old) for FY 2018-19 –
Income Tax Slabs — Tax Rate
Income up to Rs 2,50,000* — No tax
Income from Rs 2,50,000 – Rs 5,00,000 – 5%
Income from Rs 5,00,000 – 10,00,000 – 20%
Income more than Rs 10,00,000 – 30%
However, a problem that may manifest itself is that the Union Budget will precede the unveiling of the Direct Tax Code Report on February 28. Tinkering with the tax rates before the release of the report will make it contentious.
The new Direct Tax Code will try to bring more assessees into the tax net, make the system more equitable for different classes of taxpayers, make businesses more competitive by lowering the corporate tax rate and phase out the remaining tax exemptions that lead to litigation. It will also redefine key concepts such as income and scope of taxation.
In the 2017 Budget, Finance Minister Arun Jaitley had proposed to reduce existing rate of taxation of those with income between Rs 2.5 lakh to Rs 5 lakh from 10 percent to 5 percent.