‘Mid­dle-class can hope for tax re­lief in up­com­ing Bud­get’

Millennium Post - - FRONT PAGE - MPOST BUREAU

NEW DELHI: The mid­dle class can hope for a sig­nif­i­cant re­lief in 201819 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 are 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 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 lim­ited re­lief to the small tax­payer by re­duc­ing the rate from 10 per­cent to 5 per­cent for in­di­vid­u­als hav­ing an 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 per­cent on in­come be­tween 5-10 lakh, levy 20 per­cent rate for in­come be­tween Rs 10-20 lakh and 30 per­cent for in­come be­yond Rs 20 lakh.

At present, there is no tax slab for in­come be­tween 10-20 lakh.

“Con­sid­er­ing the steep rise in the 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 the 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 per­cent, it is un­likely that the min­istry will agree to that due to pres­sure on fis­cal deficit.

The sub­dued in­di­rect tax col­lec­tion fol­low­ing the roll­out of Goods and Ser­vices Tax from July 1 last year has put pres­sure on the fis­cal deficit, which has been pegged at 3.2 per­cent 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.

Ac­cord­ing to in­dus­try body Ficci, there is a like­li­hood that de­mon­eti­sa­tion ef­fects may linger on for some more months and hence there is a need to boost de­mand fur­ther 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 per­cent tax rate should be ap­plied only if the in­come is above Rs 20 lakh. 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 Rs 1 lakh 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 the as­sess­ment year 2006-07.

File photo Pic/ Naveen Sharma

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