New Delhi: Finance Minister may double the income tax exemption threshold from the present Rs 2.5 lakh to Rs 5 lakh, for the salaried class, sources told Zee Media.
Currently, income up to Rs 2.5 lakh is exempt from personal income tax. Income between Rs 2.5-5 lakh attracts 5 percent tax , while that between Rs 5-10 lakh is levied with 20 percent tax. Income above Rs 10 lakh is taxed at 30 percent. Rs 5 lakh exemption is only applicable to individuals of over 80 years.
Sources told Zee Media that the decision has been taken to bring parity between taxpayers after the government’s decision to implement 10 percent reservation in jobs and educational institutions for the economically backward section in the general category.
The common man expects that if the income tax limit is increased from prevailing Rs 250,000 to Rs 500,000, it would help them save more. Additionally, increase in tax limit will kickstart savings which will ultimately lead to increase in investment and liquidity in the system.
Contrary to expectations, Finance Minister Arun Jaitley in the last Budget announced that there will be no change in personal income tax slab for salaried employees in the current fiscal year.
However, in some relief for the salaried class, Jaitley announced that the standard deduction of Rs 40,000 has been increased in respect of transport allowance and reimbursement of miscellaneous medical expenses.
In the 2017 Budget, Jaitley had proposed to reduce the existing rate of taxation of those with income between Rs 2.5 lakh to Rs 5 lakh from 10 percent to 5 percent.