Hike in IT exemption limit on the cards

Hike in IT exemption limit on the cards

“The Finance Minister has been expressing concern over rising prices and is contemplating to further enhance the IT exemption limit marginally to give some relief to people,” sources close to the Budget making exercise told Deccan Herald.

The proposed hike in the IT exemption limit for individuals could be in the range of Rs 15,000 and Rs 20,000. But it is quite unlikely that the Minister would make any change in the existing income tax slabs, sources added.

The Tax Research Cell (TRC) of the Budget Division of the Finance Ministry, which provides inputs for preparation of tax proposals, is learnt to have recommended for a ‘marginal’ hike in the IT exemption limit to offset the impact of inflation. TRC has suggested that though there will be some revenue loss with further enhancement of IT exemption limit, it will be more than offset with the growing expansion of tax base as well as upward movement in average income level.  

Significantly, the TRC has not made any recommendations to tinker with the existing tax slabs.

Apart from inflation factor there is a strong possibility of IT exemption limit getting hiked further in the forthcoming Budget as the government has already proposed to raise the existing limit to Rs 2 lakh in line with the Direct Taxes Code (DTC), which is scheduled to come into effect from April 1, 2012.

Last year, the government had introduced the DTC Bill, which seeks to replace archaic Income Tax Act, 1961.

 Currently, IT exemption limit in case of individuals is pegged at Rs 1.6 lakh. For women and senior citizens, the limit is fixed at Rs 1.9 lakh and Rs 2.4 lakh, respectively.

The Congress-led  UPA government in its pre-Budget meting with Mukherjee has urged him to give some respite to the inflation-hit commonman by  hiking the IT exemption limit.
Besides, several trade union bodies as well as Apex Chamber of Trade and Industry like ASSOCHAM in their pre-Budget memorandum have strongly demanded for enhancing the IT exemption limit to Rs 3 lakh.