Finance minister Pranab Mukherjee may have some good news for the salaried class in the budget for 2012-13.
The Centre is considering a restructuring of income tax slabs and increasing the income tax exemption limit from the existing Rs 1.8 lakh to at least Rs 2 lakh—a move that would leave more money in the hands of people.
Besides, a rejig in income tax slabs is also on the cards, the details of which are being hammered out.
Sources indicated that the new tax slabs could be in line with the Direct Taxes Code Bill, which was introduced in Parliament in 2010.
The bill has proposed that incomes between Rs 2-5 lakh be taxed 10%, those between Rs 5-10 lakh be taxed 20% and incomes above Rs 10 lakh per annum be taxed 30%.
At present, incomes between Rs 1.8 lakh and Rs 5 lakh are taxed 10%, those between Rs 5-8 lakh taxed 20% while incomes above Rs 8 lakh attract a tax rate of 30%.
A rejig in tax slabs along with a hike in exemption limits will enhance people’s disposable incomes, which, in turn will boost consumption spending as well as savings.
The government is negotiating through a maze of thorny issues ahead of this year’s budget amid faltering demand and rising prices that have hit growth in the broader economy.
“At this point in time, giving relief to rising prices and inducing people to spend is a very high priority,” the source said.