New Delhi:Taxpayers can expect some relief from high inflation in Budget 2011-12 as the government may raise the income tax exemption limit for individuals.
“Finance minister Pranab Mukherjee is alive to the price situation and its impact on the common man,” sources said, adding he would favourably consider the issue of hiking tax exemption limit.
Moreover, they said, as the government is committed to raise the income tax exemption limit from Rs 1.6 lakh per annum to Rs 2 lakh in line with the Direct Taxes Code (DTC) in 2012-13, tax payers could expect at least some relief in the upcoming Budget on 28 February.
“The finance ministry would keep in mind the high inflation in the Budget. Since there is no dearness allowance for a vast section of the society, hike in income tax exemption limit is likely,” a source said.
Presently, income up to Rs 1.6 lakh is exempt from tax for individuals. For women and senior citizens, the limit is 1.9 lakh and 2.4 lakh, respectively.
However, under the DTC Bill which was introduced in Parliament last year, the I-T exemption limit is of 2 lakh.
In the DTC bill, the government seeks to widen tax slabs to levy 10% rate on income between Rs 2 lakh and Rs 5 lakh, 205 on Rs 5-10 lakh and 30% above Rs 10 lakh.
The DTC, which would replace the Income Tax Act, is slated to come into effect from April 2012.
“Since inflation is eating into the income of the people, some of DTC provisions can be implemented to benefit the common man,” the official added.
Inflation, particularly of food, has been a concern for both the government and the common man. For the past few months, food prices have been staying at very high levels.
The wholesale price food inflation rose to 15.57% for the period ended 15 January, on escalating vegetable prices, particularly, onions. It was at 15.52% for the week ended 8 January.
The overall inflation in December 2010 had also gone up to 8.43%, up from 7.48% in the previous month, mainly driven by costly food items.
Recently, P. Chidambaram who served as finance minister before moving to the interior ministry in the previous UPA regime said that there is no tax worse than inflation.