Some industry bodies, including the CII, have recommended that the I-T exemption limit should be doubled to Rs 5 lakh. However, is this possible?
Will the income tax exemption limit be raised to Rs 5 lakh from Rs 2.5 lakh currently in this year’s budget? That is the question playing on everyone’s mind today. More because some media reports have already suggested that to woo the taxpayers in this election year, Finance Minister Arun Jaitley may do so in the Budget 2019. What is more, even some industry bodies, including the CII, have recommended that the I-T exemption limit should be doubled to Rs 5 lakh. However, the million-dollar question is: Is this possible?
According to tax experts, this is unlikely even in the current scenario. However, additional benefits may be given to the salaried employees by reinstating a few exemptions which were withdrawn last year.
“There is a buzz that the Finance Minister may double the income tax exemption limit for individuals from Rs 2.5 lakh to Rs 5 lakh. Currently the rate of tax for the slab between Rs 2.5 lakh and Rs 5 lakh is 5% and there are 2.55 crore taxpayers in this slab paying tax of Rs 1,213 crore. Increasing the exemption limit to Rs 5 lakh would mean that 2.55 crore taxpayers would go out of the tax net,” says Ashok Shah, Partner, N.A Shah Associates LLP.
In fact, the finances of the government are already stretched on account of low collection of GST. Hence it is unlikely that the Finance Minister will sacrifice this type of revenue even if it is an election year. “It is, however, more likely that some benefit will be given to the common man by marginally increasing the exemption limit by about Rs 50,000. Additional benefits may be given to the salaried employees by reinstating a few exemptions which were withdrawn last year,” adds Shah.
Some tax exerts, however, say that if the tax exemption limit gets doubled, that would be a great move and should, therefore, be welcomed.
In fact, among the numerous expectations from the Union Budget 2019, income tax is going to be a much-hyped topic in the light of the upcoming elections. The Confederation of Indian Industry (CII), for instance, has proposed a few crucial suggestions on the personal tax front. The most important proposal is to double the income tax exemption limit from the existing threshold of Rs 2.5 lakh to Rs 5 lakh in order to incentivize savings in the hands of taxpayers at large.
“This move will leave more space for the taxpayers to spend, thereby improving the Consumption Ratio of the country. On a micro economy level, tinkering of the tax slab will give a substantial relief to the middle-income group, especially the salaried class, and would help them tide over the impact of retail inflation. This would definitely result in a substantial fall in the tax collection for the government, but such a deficit can be recovered by launching tax saving/ investment schemes, leading to more disposable funds available in the hands of government,” says Akhil Chandna, Director-Tax, Grant Thornton India LLP.
However, that would be a greatly-applauded step by the government, if implemented.