IT slabs likely to be realigned
Finance Minister Jaswant Singh will, in all probability, realign the income slabs, tinker with exemptions, standard deductions and tax rebates to provide income tax relief to the lower middle class which the NDA government is targeting to expand its support base in the run-up to the assembly and general elections.
Sources said Singh, in his maiden budget, would attempt to put more money in the hands of the lower middle income groups as promised while taking over charge of the finance ministry in July this year from Yashwant Sinha with whom he swapped portfolios.
Revenue department officials maintained there was a strong possibility of exempting the income up to Rs 60,000 from income tax as against the prevailing Rs 50,000 from income tax.
And, consequently, Singh may also raise the upper income limit for those falling in the income bracket paying 10% income tax to beyond Rs 100,000 per annum. A similar revision in upper income limits for those paying 20% and 30% income tax is also envisaged.
The Kelkar panel’s proposals notwithstanding, standard deductions and tax rebates would be continued, the sources maintained.
Indications are that while retaining the Rs 30,000 standard deduction for the lowest slab, the gross salary for which this concession is applicable may be raised from Rs 1.5 lakh per annum to provide the benefit to low-end employees.
Similarly, some tinkering in the gross salary limit for which Rs 25,000 and Rs 20,000 deduction is applicable may be raised from the Rs 3 lakh and Rs 5 lakh limit, respectively.
While finance ministry officials are tight-lipped, the sources said some realignment and corrections may be made in tax rebates provided under Section 88 of the Income Tax Act on investments in specified assets with the possibility of creating a fifth slab. The investments include NSC, NSS, EPF, PPF, tax saving units of mutual funds and premia paid on life insurance, repayment of housing loans and infrastructure bonds of ICICI and IDBI.
It is learnt the finance minister may also examine the possibility of hiking tax incidence for charitable trusts, public schools and cooperative societies. Though all of them are already covered under the tax net, some loopholes leading to revenue loss are also sought to be plugged.
The sources said Singh would, in all likelihood, also scrap dividend tax to provide a fresh lease of life for the capital markets, bolster investment sentiment and indicate his "equity bias" to savings instruments.