Centre likely to recast personal income tax slabs

New Delhi, November 19: | Updated: Nov 20 2001, 05:30am hrs
The government is likely to restructure personal income tax (I-T) slabs in the 2002-03 budget by increasing the limits of each slab.

Confirming the possibility of such an exercise, finance ministry sources said restructuring of I-T slabs would partly neutralise the impact of phasing out of I-T exemptions on small savings. The finance ministry is considering removal of tax exemptions on host of small savings schemes from April 1, as suggested by the Y V Reddy committee on administered interest rates.

The sources, however, added that the I-T rates of 10 per cent, 20 per cent and 30 per cent were likely to be retained. The extent of changes in the slab structure would depend on the revenue implications, according to them.

At present, there are three slabs of personal I-T. Income between Rs 50,001-Rs 60,000 attracts 10 per cent rate, Rs 60,001-Rs 1.5 lakh attracts 20 per cent, and income above Rs 1.5 lakh attracts 30 per cent.

Sources said the structure recommended by the Planning Commission advisory group for I-T slabs was likely to be considered as the base model for the budget discussions on broadening of the slabs.

The advisory panel on tax policy and tax administration for the 10th Plan, headed by Parthasarathi Shome, has proposed that the 10 per cent rate should be extended to the income band of Rs 50,001 to Rs 1 lakh, 20 per cent rate to Rs 1,00,001-Rs 2 lakh band, and income above Rs 2 lakh should attract 30 per cent rate. It also suggested that the Rs 50,000-limit for tax exemption should be kept intact.

The panel has pointed out that tax rates of 10 per cent and 20 per cent were applicable for income up to Rs 10,000 and Rs 20,000, respectively, in 1973-74. The inflation adjusted corresponding income levels were Rs 1 lakh and Rs 2 lakh in the current fiscal, it said, adding that the existing corresponding income levels of Rs 60,000 and Rs 1.5 lakh were substantially lower than the inflation-indexed levels, thereby resulting in an increase in real tax liability.