Battling slowdown and high inflation, finance minister P Chidambaram is likely to raise the income tax exemption limit from Rs. 2 lakh to about Rs. 2.5 lakh in Budget 2013-14.
The aim: Provide more expendable funds to households, which could help recharge the economy. A government official who did not wish to be identified told
HT: “Most people are avoiding making purchases. The effort of the government would be to leave more money in the hands of the people.”
The parliamentary standing committee under BJP leader Yashwant Sinha — which looked into the Direct Tax Code bill — proposed that the limit should be raised to Rs. 3 lakh and the subsequent tax slabs needed to be adjusted in a manner that would provide relief to people.
Parthasarathi Shome, advisor to the finance minister, recently said the government was considering the DTC bill while working on the tax structure as suggested by the committee.
The DTC, which is set to be implemented this year, will replace the Income Tax Act, which is over five decades old.
In the last union budget, then finance minister Pranab Mukherjee raised the income tax exemption limit by just Rs. 20,000 from Rs. 1.8 lakh to Rs. 2 lakh.
Surya Bhatia, financial tax planner, however, said this time the base tax exemption slab may be hiked even higher than Rs. 2.5 lakh.