Budget 2018: As Finance Minister Arun Jaitley is prepping up to present the Union Budget 2018 on February 1, he may consider some manoeuvring in the personal income tax to provide some relief to the middle-class, continuing the last year’s trend. In the Budget 2018, the middle-class can hope for big relief as the government is mulling for hiking tax exemption limit and tweaking slabs.
Last year, Arun Jaitley, besides announcing tax reliefs for small firms, also halved the tax rate for individuals earning between Rs 2.5 lakh per annum and Rs 5 lakh to 5% from 10%. He also proposed a surcharge of 10% for individuals earning an annual income between Rs 50 lakh and Rs 1 crore. FE Online in December reported that the government may lower the income tax, besides simplifying the Direct Tax Law.
In the India Budget 2018, following changes could be made by Arun Jaitley in the Union Budget 2018:
1. Increase in tax exemption limit: The government may consider hiking the tax exemption limit from present Rs 2.5 lakh per annum to Rs 3 lakh per annum. Many stakeholders, who put forth their proposal to Arun Jaitley during pre-Budget consultation meetings, made a case for hiking the exemption limit, some even to Rs 5 lakh per annum.
2. Tax rate cut: While there could be some relief for lower income individual, the Finance Minister may also have something for the “new middle class” with an earning between Rs 10 lakh per annum and Rs 50 lakh per annum. According to a report by Deccan Herald, the government is considering cutting the top income tax slab from 30% to 25% with an aim to widen its tax base which is just 2.5% of the total population presently.
3. Increase in 80C limit: Under section 80C, an individual can reduce up to Rs 1,50,000 from the total taxable income. The government may hike this exemption to Rs 2 lakh per annum. However, this may come with some terms and conditions.
4. Tax-free gratuity: Payment of Gratuity Amendment Bill 2017 is likely to be passed in the upcoming Budget session. If passed, it would mean that formal sector workers would be eligible for tax-free gratuity up to Rs 20 lakh per annum from the present Rs 10 lakh.
Watch video: Budget 2018: 5 Blockbuster Income Tax Moves Common Man Can Expect
The Budget 2018 will be the first post-GST budget. The Union Budget has two parts — Part A contains allocations to different sectors and schemes, while Part B contains tax proposals, both direct and indirect. Since the implementation of the GST, more than 12 different taxes including VAT, Excise Duty got subsumed, hence, leaving no room for the Budget manoeuvre under different indirect tax heads. Any decision on indirect tax on goods and services is now taken by the GST Council.
Besides, sops for the middle class, Arun Jaitley may also consider his long-promised proposal of bringing down the corporate tax rate from 30% to 25%.