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  1. Budget 2018: Income tax slab rates for FY2018-19 may be changed by FM Arun Jaitley to give relief to common man

Budget 2018: Income tax slab rates for FY2018-19 may be changed by FM Arun Jaitley to give relief to common man

Budget 2018: Finance Minister Arun Jaitley is expected to give some tax sops to the common man and taxpayers in the Budget 2018. Changing income tax slabs for FY2018-19 may be one of them.

By: | Updated: January 30, 2018 12:00 PM
Finance Minister Arun Jaitley in Budget 2018 may change income tax slabs for FY2018-19 to give relief to common man Budget 2018: Experts feel that as the government needs to keep the revenue generated from income tax intact, the tax slabs need to be rejigged in a way that benefits both taxpayers and the government.

Budget 2018 is round the corner and everyone – especially the salaried class — is looking towards Finance Minister Arun Jaitley with much hope. And why not? This is the Modi government’s last full budget before the 2019 polls, which is expected to be a populist one to some extent. Among many expectations of the common man, one major expectation is that the basic exemption limit may be increased from Rs 2.5 lakh to Rs 3 lakh in the Union Budget 2018. There is a lot of buzz in the media also that this may be done by FM Arun Jaitley to give some relief to the common man and woo the masses.

In fact, everyone was expecting FM Arun Jaitley to raise the basic exemption limit in the Union Budget 2017 itself. More because, hit hard by demonetisation as well as rising prices, the common man needed some relief. However, FM Jaitley preferred not to do this and instead made some changes in the tax slabs. For example, he reduced the rate of taxation from 10 per cent to 5 per cent for individual assesses between income of Rs 2.5 lakh and Rs 5 lakh, which resulted into a reduction in tax liability of all persons below Rs 5 lakh income either to zero (with rebate) or 50 per cent of their earlier liability. After this amendment, people were also expected to save more money in their pocket, especially those whose income was below Rs 50 lakh. This amendment in fact will now help you in saving up to Rs 12,500 every financial year.

It may be recalled that while presenting the Budget 2017, FM Jaitley had said that the present burden of taxation was mainly on honest tax payers and salaried employees who were showing their income correctly. Therefore, post-demonetisation, there was a legitimate expectation of this class of people to reduce their burden of taxation. The Finance Minister had further said that if a nominal rate of taxation was kept for lower slab, many more people would prefer to come within the tax net.

It is clear, thus, that the Modi government favours reduction in the burden of honest taxpayers and lower tax slabs, which is also helping them increase the taxpayer base. FM Arun Jaitley, therefore, is expected to give further relief to the common man and taxpayers in the Budget 2018 also.

Watch Video: 5 Blockbuster Income Tax Moves Common Man Can Expect

Budget 2018: Experts’ take on change in income tax slabs

Tax experts feel that there is certainly a case for FM Jaitley to make some changes in the current income tax slabs or go for reduction in the tax rates to give some relief to the honest taxpayers through his Union Budget proposals for the common man.

“Currently, for the income tax slab between Rs 2.5 lakh and Rs 5 lakh, the tax rate is 5%, while for the income tax slab between Rs 5 lakh to Rs 10 lakh, the tax rate is 20%. This massive increase in the tax rate from 5% to 20% is too big and there certainly is a case for introduction of a 10% slab in between. Alternatively, the Modi government could increase the income tax slab limit for 20% tax from Rs 5 lakh to Rs 7 lakh and for the 30% tax from Rs 10 lakh to Rs 12 lakh. It has also been observed that the lower the tax rates, the lower is the tax evasion. Therefore, the government should encourage the public to pay their taxes honestly by reducing the tax rates and/or increasing the income tax slabs,” says Karan Batra, Founder & CEO of CharteredClub.com.

In fact last year, before the budget, reports did emerge about the tax slabs being raised. However, there was no such move by the government. “This year, once again, expectations are high that an increase in the tax slab from Rs 2.5 lakh to Rs 3 lakh would be done in the Budget 2018. This would be a welcome measure at this juncture as a majority of the salaried class people have been deprived of access to a higher disposable income, given the steep rise in the cost of living due to inflation and the absence of a corresponding increase in income,” says Archit Gupta, CEO & Founder, ClearTax.in.

Also Read: Budget 2018: Income tax slabs to job creation should be FM Arun Jaitley’s prime focus

Some experts feel that as the government needs to keep the revenue generated from income tax intact, the tax slabs need to be rejigged in a way that benefits both taxpayers and the government. “The 5% tax was great relief to those earning up to Rs 5 lakh a year, but given the impact of retail inflation, a substantial relief is needed for the middle-income income tax slab (Rs 5 to Rs 10 lakh). This slab can be rejigged to exclude those earning up to Rs 7 lakh, keeping the 20% tax rate consistent. The highest income group should be raised to above Rs 12 lakh,” says Adhil Shetty, CEO, Bankbazaar.com.

Income Tax Slabs for Financial Year 2017-18:

Income Group (In Rupees)

Current Tax Slab (In %)

0 – 2,50,000

Nil

2,50,000 – 5,00,000

5%

5,00,000 – 10, 00,000

20%

Above 10,00,000

30%

Expected Income Tax Slabs (FY2018-19):

Income Group (In Rupees)

Expected Tax Slab (In %)

0 – 3,00,000

Nil

3,00,000 – 7,00,000

5%

7,00,000 – 12, 00,000

20%

Above 12,00,000

30%

(Source: Bankbazaar.com)

Even if there is no rejig in the actual income tax slab, “there definitely needs to be an increase in the exemption limit especially for Section 80C, where the exemption should be raised to anywhere between Rs 2 and Rs 3 lakh. The medical reimbursement component also needs to be increased from Rs 15,000, so that the salaried class could get some relief keeping in view the increasing medical costs,” says Shetty.

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