“Finance Minister P Chidambaram may consider effecting a modest increase in the exemption limit,” official sources said, adding existing exemption limit of Rs 1,10,000 is likely to be increased in the “modest” range of Rs 10,000 and Rs 15,000.

With expectations that the Sixth Pay Commission may recommend higher pay scales, the average pay of salaried class is likely to go up sources said. The Sixth Pay Commission, whose term expires on April 4 this year, is expected to submit its report before its term expires, they added.

Fuelling demand

The other major reason touted for some rise in IT exemption limit is that further enhancement in exemption limit will leave more money in the pockets of average tax-payers to spend. Economic experts are suggesting that government should take necessary fiscal measures to spur demand in consumer durables sector.

“One way to encourage average tax-payers to spend more is by enabling them to have little bit more disposable income. This could be done by enhancing IT exemption limit,” a senior functionary of Ficci said.   

The Tax Research Cell (TRC) of the finance ministry, which provides inputs for Budget preparation, is also understood to have suggested for “marginal” hike in the exemption limit.  But TRC is said to be against any change in existing tax slabs.

BUDGET WISHLIST

S Narayanan
CMD, MRO-TEK

*Remove hardware manufacturing industry from the MRP list as certain products are treated as a commodity when they are not. For example, leased line modems are professional products, but treated as commodity.
*Surcharge on IT be brought down to 5 per cent from the high level of 10 per cent. 
*Dividend distribution tax be brought down to 10 per cent from 15 per cent.
* FBT, which puts serious constraints on business operations, be removed. An exception could be in case of ESOPs, where certain more scientific and acceptable methodologies have to be brought in while computing FBT.
* Excise duty be brought down to 12 per cent from  16 per cent.