Finance Minister Pranab Mukherjee may have some good news for the salaried class with the government considering a small increase of Rs 10,000 per annum in the income tax exemption limit from the current Rs 1,60,000.
The move is aimed at giving more money at the hands of the people stung by sharp rise in prices of essential commodities.
A Rs 10,000 per annum hike in the annual tax exemption limit to Rs 1.7 lakh would result in an estimated revenue foregone for the government of not more that Rs 5,000 crore, said a government source, who did not wish to be identified.
“At this point in time, the giving relief to rising prices is a bigger priority,” the source said.
The last major hike in the income tax exemption limit was in 2008-09, when the then Finance Minister P. Chidambaram increased the threshold by Rs 40,000 in one go to Rs 1,50,000 thousand per annum.
It was increased to Rs 1,60,000 per annum in the subsequent year.
The move to raise the income tax exemption limit is aimed at “providing interim relief to small and marginal taxpayers and senior citizens” in wake of higher inflation, a source said.
The extent of hike in the exemption limit for senior citizens, for whom the income tax threshold limit has been set at Rs 2.4 lakh per annum, is expected to be slightly higher than others.
President Pratibha Patil, in her address to the joint session of Parliament on Monday, said the government would accord the highest importance to ensuring relief to the “aam aadmi” —the common man — on prices of food items.
Overall inflation accelerated to 8.56 per cent in January, the highest in more than a year pushed by prices of food items that were surging close to 18 per cent year on year.
High food prices have also begun cascading into higher costs for industrial inputs as global recovery boosts commodity prices on the back of higher demand for crude oil, iron ore and coal.
Direct tax collections have been buoyant in recent months, partly aided by a smart recovery in the industrial sector that grew by a record 16.8 per cent year-on-year in December. However, the government still faces a resource crunch.