Finance Minister Arun Jaitley may double the income tax exemption threshold for the salaried from the present Rs. 2.5 lakh to Rs. 5 lakh while also reinstating tax-free status for medical expenses and transport allowance, providing some relief to the section already under strain since demonetisation.
Though propriety demands that not too many policy changes should be made in an interim Budget, the BJP government is apprehensive of the possibility of a middle-class backlash in the impending general elections.Hence the plan to streamline tax slabs, which in any case are in consonance with the coming Direct Tax Code, government sources told news agency IANS.
The problem that may manifest itself is that the Union Budget will precede the unveiling of the Direct Tax Code Report on February 28. Tinkering with the tax rates before the release of the report will make it contentious.
Bumper gift to India's honest tax payers
Modi Govt is likely to increase Income Tax exemption limit from Rs 2.5 lakh to Rs 5 lakh in Budget 2019
If so, then 300+ seats are guaranteed in 2019 election
Don't forget that in 2014, exemption limit was raised from Rs 2 L to Rs 2.5 L
— Mahesh Vikram Hegde ಮಹೇಶ್ ವಿಕ್ರಮ್ ಹೆಗ್ಡೆ (@mvmeet) January 14, 2019
The new Direct Tax Code will try to bring more assessees into the tax net, make the system more equitable for different classes of taxpayers, make businesses more competitive by lowering the corporate tax rate, and phase out the remaining tax exemptions that lead to litigation. It will also redefine key concepts such as income and scope of taxation.
At the moment, income up to Rs. 2.5 lakh is exempt from personal income tax. Income between Rs. 2.5 lakh and 5 lakh attracts a 5 per cent tax (see table), while that between Rs. 5 lakh and Rs. 10 lakh is levied with a 20 per cent tax. Income above Rs. 10 lakh is taxed at 30 per cent. Exemption on income up to Rs. 5 lakh is only applicable to individuals of over 80 years.
Income Tax return joy? Budget 2019 may hike exemption slab from Rs 2.5 lakh to Rs 5 lakh https://t.co/LXJpoGs4Ja
— Zee Business (@ZeeBusiness) January 15, 2019