On February 1, when Finance Minister Arun Jaitley delivers the budget, one of the most significant changes that everyone will look forward to is the revision of the tax slabs. An increase of the tax exemption limit is what a lot of the citizens want. A proposal was recently made to the finance ministry calling for a revision of the tax slab and raising the limit from Rs 2.5 lakh per annum to Rs 3 lakh.
A recent survey conducted by LocalCircles found out that 31 per cent of respondents want the tax exemption limit to be increased to Rs 3 lakh. Thirty seven per cent respondents want tax slabs to be raised to lower the tax burden on people. The survey was conducted across 200 Indian cities and as many as 1.25 lakh people voted.
One of the primary factors that is leading people to seek this increase is the disruption unleashed by demonetisation. Moreover, the cost of living is also on the rise with no corresponding increase on income. Add to that the fact that there have been no significant changes in the Section 80C limit in the last few years. The exemption limit of 80C could also be increased to Rs 2 lakh from the current Rs 1.5 lakh so that tax payers can avail more deduction.
As of now, no tax is levied on income of upto Rs 2.5 lakh annually, while 5 per cent is applied on the bracket of Rs 2.5 lakh to Rs 5 lakh, 20 per cent on Rs 5 lakh to Rs 10 lakh and 30 per cent on income from Rs 10 lakh onwards. These slabs could be revised to increase the non-taxable income bracket upto Rs 3 lakh, while 5 per cent could be applied on Rs 3 lakh to Rs 7 lakh, 20 per cent on Rs 7 lakh to Rs 12 lakh and 30 per cent on Rs 12 lakh and above.
There could also be a new slab for the annual income of Rs 10 to Rs 20 lakh. In that case, the slabs would be further revised.
Industry bodies CII and FICCI have also asked for rationalisation of personal income tax slabs in their memorandum submitted to the finance ministry. According to FICCI, there is a likelihood that the effects of demonetisation may linger on for some more months and hence there is a need to further boost demand. A revision of income tax slabs, by raising the income level on which peak tax rate would trigger, "would improve purchasing power and create additional demand."
In the last budget, the finance minister had reduced the tax rate on the Rs 2.5 lakh to Rs 5 lakh bracket to 5 per cent. Will he fulfil the wishes of the citizens this time as well remains to be seen.