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Even Rs 200 over Rs 5 lakh income leads to Rs 13,000 income tax! Budget 2022 should end this

Union Budget 2022 marginal Income Tax Relief Expectation: While an individual is not required to pay any tax on annual income up to Rs 5 lakh, he/she becomes liable to pay tax even if there is a very little increase in income

budget 2022 income tax marginal relief
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Union Budget 2022 Marginal Income Tax Relief Expectation: While an individual is not required to pay any tax on annual income up to Rs 5 lakh, he/she becomes liable to pay tax even if there is a very little increase in income.

For example, even if the annual income is Rs 200 more than Rs 5 lakh, a tax liability of Rs 13,000 arises. Tax experts have suggested that the upcoming Budget 2022 should provide a provision through which taxpayers will not be liable to pay any tax if their income is a little over Rs 5 lakh.

“The goal of marginal relief is to ensure that an individual’s tax bill does not rise faster than his or her income rises above the stipulated limit. Individuals whose taxable income is Rs. 5,00,000 have zero tax liability and individuals having taxable income of Rs. 5,00,200 will end up paying Rs. 13,000 approx tax just due to additional Rs. 200 income,” experts at Tax2Win said in their pre-budget expectations while explaining the rationale behind the need for such a provision in tax rules.

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“The introduction of marginal relief just like available in the case of surcharge will remove this gap, they added.

The Federation of Indian Chambers of Commerce and Industry (FICCI) has also suggested the Government to provide marginal relief if the total income of resident individual taxpayers crosses Rs. 5 lakhs threshold by a small margin.

“To alleviate the difficulty for small taxpayers, it is recommended that the concept of marginal relief should be introduced for small taxpayers where their total income marginally exceeds the threshold of Rs. 5 lakhs such that tax liability does not exceed the incremental income beyond Rs. 5 lakhs,” FICCI said in its pre-budget memorandum.

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