New Delhi: The interim budget on 1 February could have some good news for taxpayers ahead of the Lok Sabha election later in the year. Finance minister Arun Jaitley may double the income tax exemption threshold from the present ₹ 2.5 lakh to ₹ 5 lakh, according to an IANS report. Jaitley may also reinstate tax-free status for medical expenses and transport allowance, the news agency reported quoting government sources.
Doubling the income tax exemption limit to ₹ 5 lakh is a major demand made by the Confederation of Indian Industry (CII), as reported by PTI. The industry chamber has also sought an increase in the deduction under Section 80C to ₹ 2.50 lakh to incentivise savings.
The CII’s pre-budget recommendations to the finance ministry also include the suggestion of lowering the highest personal income tax rate to 25% from 30% and allowing exemptions for medical expenses and transport allowance.
Watch: Interim Budget 2019: What to expect from Arun Jaitley
Altering income tax slabs before the release of the Direct Tax Code Report on February 28 will make it contentious, IANS has pointed out.
The new Direct Tax Code, which will replace the Income Tax, 1961, is expected to make income tax rates more ‘progressive’ by providing relief to people in the 5% and 20% slabs, Mint has reported earlier on May 14.
According to the current tax slab, income below ₹ 2.5 lakh is tax exempt. Income between ₹ 2.5-5 lakh attracts 5% income tax. Income in between ₹ 5-10 lakh is taxed at the rate of 20% while anything above ₹ 10 lakh is taxed at 30%.