Budget 2018: Only five days are left for the Budget, and Arun Jaitley may consider some manoeuvring in the personal income tax to provide some relief to the middle-class, but the Budget 2018 day, February 1 may not be the full show but merely a curtain raiser.
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 some relief as the government is mulling for hiking tax exemption limit and tweaking slabs. However, in his Budget speech earlier, he also said that India has become “India has become largely a tax non-compliant society.”
While 3.7 crore individuals filed income tax returns, 99 lakh of those claimed the yearly income below the exemption limit of Rs 2.5 lakh, leaving just 2.81 crore individuals who actually paid tax. Of these 2.81 crore individuals, mere 24 lakh people showed income above Rs 10 lakh, with only 1.72 lakh reporting an income of above Rs 50 lakh, according to latest data. After the implementation of the GST last year, the government, indeed, is looking for a major direct tax overhaul, but the Budget 2018 day, February 1, may not be the full show but merely a curtain raiser.
Last year in November, the government formed a task force to revamp the more-than-50-year-old Income Tax Law, 1961. However, the task force is expected to submit their report only by May or June. Even as, traditionally, Arun Jaitley always had something for the middle/salaries class in all his last four Budgets, low tax compliance is an issue too, which will be a part of his final Budget 2018 math.
Media reports suggest some changes could be made by Arun Jaitley in the Union Budget 2018: 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.
While there could be some relief for lower income individuals, 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.
Senior tax advocate Mukesh Patel says that while, in the last full Budget of the government, ahead of the impending General Elections, taxpayers expectations are high and rightly so. However, some of the steps like hiking tax exemption limit does not seem practical at this point. The aim is also to widen the tax base and to ensure that the taxpayer also pays its tax honestly.
Watch Video: Budget 2018: FM Arun Jaitley May Tweak Income Tax Basic Exemption Limit
The middle class may expect some changes in the section 80C. Under the section, an individual, presently, 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. 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.