Millions of income tax payers expecting finance minister Pranab Mukherjee to raise the tax exemption limit on Monday, have a strong supporter in former finance minister and senior BJP leader Yashwant Sinha.
Sinha, who was in charge of the country's finances during the NDA regime between 1998 and 2002 have a few tips for Mukherjee, who will present his Budget for 2011-12.
The former finance minister wants the Government to provide some relief to the middle class people from inflation, particularly high food and fuel prices.
"...he (the Finance Minister) should introduce some of the provisions, which are part of the DTC, like raising exemption limit on income tax," Sinha said.
There are about 40 million income tax payers in the country.
The annual exemption limit for income tax at present is Rs 1.6 lakh per annum for men and Rs 1.9 lakh for women. The threshold for senior citizens is Rs 2.4 lakh.
He said the minimum exemption limit should be raised to Rs 2 lakh in line with the proposed Direct Taxes Code, which is under examination of Standing Committee of Parliament on Finance, headed by Sinha.
He also pitched for reintroduction of standard deduction, which was stopped in 2006. A fixed amount is deducted from the earnings of salaried employees over and above the tax exemption threshold, for arriving their taxable income.
Sinha said the provision of standard deduction should be brought back to help the middle class people, who have been impacted by high inflation hovering around 8%.
He also said that tax incentives on savings should be enhanced. At present, savings up to Rs 1 lakh is deducted from the taxable income. Extra deduction of Rs 20,000 is allowed for investment in infrastructure bonds.
"There is a case for going for a larger limit of exemption of savings, which is today limited to Rs 1 lakh," Sinha said.
He suggested that there should be a higher limit of deduction for taxable income for interest paid on housing loans. At present, it is fixed at Rs 1.50 lakh.
Sinha said these are the measures which people expect from the Finance Minister to limit the impact of the price rise, which has eroded the purchasing power of the common man.