New Delhi:
With middle-class apathy on the rise, Finance Minister Arun Jaitley may double the income tax exemption threshold for the salaried from the present ₹250,000 to ₹500,000 while also reinstating tax-free status for medical expenses and transport allowance, providing some relief to the section already under strain since demonetisation.
Though propriety demands that not too many policy changes should be made in a vote on account budget, the BJP government is apprehensive of the possibility of a middle-class backlash in the impending general elections.
As the Union Budget will precede the unveiling of the Direct Tax Code Report on February 28, tinkering with the tax slabs and rates before the release of the report will make it contentious, IANS has pointed out.
The new Direct Tax Code, which will replace the Income Tax Act of 1961, 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.
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.