Budget may raise tax exemption slab, deduction limits: Experts

NEW DELHI: With the government expecting demonetisation to improve tax mop-up, it may extend the benefit to individual tax assessees by raising the exemption limit to at least Rs 3 lakh and the deduction limit under Section 80C to Rs 2 lakh in the Union Budget for 2017-18, experts maintain.

Currently the tax exemption slab is at Rs 2.5 lakh for individuals below 60 years, while deduction under Section 80C of the Income Tax Act is Rs 1.5 lakh. “The limits have not been revised since two years. With demonetisation lots of money is getting into the regular economy. This is expected to improve the collections and give the headroom to the government to extend the benefit to taxpayers,” as per consultancy firm PwC.

“The basic exemption limit may be raised from Rs 250,000 to Rs 300,000 for individuals less than 60 years and from Rs 300,000 to Rs 350,000 for 60 years or more,” PwC said in response to IANS queries. The Union Budget is due to be presented by Finance Minister Arun Jaitley on Wednesday.

Online tax-filing portal ClearTax Co-Founder and Chief Executive Archit Gupta said that the government may also consider raising the deduction limit under Section 80C of the Income Tax Act from Rs 1.5 lakh to Rs 2 lakh.

“Due to wider investment options available under this section — includ- ing repayment of housing loans, children education expenses — individuals hardly get a tax-saving push to invest more,” PwC said.

“Enhancing limit will encourage individuals to save more for their post retirement life and also help government to gather more funds to meet its long term investments.”

Soumya Kanti Ghosh, Group Chief Economic Advisor of the State Bank of India, said the coming budget is likely to make a sweeping recast of direct taxes system to give a much-needed boost to the economy following demonetisation. Besides the increase on the tax exemption limit and deductions, he expected some more sops.

“I also expect interest exemption on housing loans to be raised from Rs 2 lakh to Rs 3 lakh, and at least reducing — if not abolishing — the lock-in period for bank fixed deposits from five years to three years for availing tax exemption,” Ghosh said.