One of the things taxpayers keenly look out for in a Union Budget is any change in the personal income tax regime. However, finance minister Pranab Mukherjee has an unenviable task before him. Though tax collections have fallen badly after the economic downturn, the slowdown also means the middle class is looking forward to some kind of tax relief.
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Industry bodies are demanding the government bring back Standard Deduction or SD, which acts as a kind of compensation for legitimate expenses that taxpayers may not be able to book. But again, Mukherjee may have little leeway.
Banks’ deposit rates have been falling and they want more instruments to be added under Section 80(C) to encourage savings. The government might make some changes here.
Two controversial taxes, the Fringe Benefit Tax or FBT and the Securities Transaction Tax or STT may also come under the finance minister’s scanner.
Opponents of FBT say it has led to a lot of litigations and has increased the cost of compliance.
Some consider STT to be conceptually unsound tax. They would like it to be replaced by Long Term Capital Gains Tax.
Overall, Pranab Mukherjee has many constraints both monetary and political. If there’s any relief in this year’s budget, it is likely to be for people who earn Rs3-5 lakhs per year. People who earn more than Rs5 lakhs are unlikely to get much.