Rationalisation of rates and tax slabs in final budget of NDA government’s second term is likely to provide some relaxation to the salaried class.
Officials of North Block, headquarters of the Union finance ministry, are exploring the possibility of increasing the tax-free slab to Rs 5 lakh in the two-year-old alternative personal income tax regime. It is important to mention in this context that as per the current tax laws, an individual is required to pay tax in case his taxable income in India surpasses the basic exemption limit. The general exemption limit is Rs 2.50 lakh per year.
Many experts are of the view that the cost of living has gone up due to sticky inflation while the tax burden remains unchanged. And it is high time to slash the rates of personal income tax in a bid to increase disposable income and revive the demand cycle.
In addition, the final full budget of the National Democratic Alliance (NDA) government’s second term is likely to provide some relief to the salaried class through rate rationalisation. According to a report from the Business Standard, which mentioned an unnamed government official, raising the limit will reduce assessees’ tax outflows and give them more money to invest as they see fit.
Currently, a very small percentage of taxpayers have chosen the alternative tax system. The tax liability under the previous personal income tax system decreases if taxpayers utilise tax exemptions like Section 80C and Section 80D. However, the alternative tax structure does not offer any benefit from deductions of any kind. Tax-free income up to Rs 5 lakh per year. Taxes that are amassed in the Rs 2.5–5 lakh slab are credited back to taxpayers.
The official continued, “However, it needs to be acknowledged how much this modification will impact the overall value and if the authority has the possibilities to do that, before considering any such move.” He added that there might be discussion about whether both the old and new individual income tax norms needed to be modified and that a preliminary average of the revenue impact of raising the tax net under the new regime had been made and might be submitted to the Budget makers for evaluation.
Confederation of Indian Industry (CII), the country’s leading business organisation, proposed an overview of the personal income tax (old regime) rates last month. It has suggested that taxes be waived up to Rs 2.5 lakh and that the rates between Rs 2.5 lakh and Rs 5 lakh be reduced from 5% to 2.5%.
Source: https://www.dnaindia.com/personal-finance/report-budget-2023-government-likely-to-increase-income-tax-free-slab-to-rs-5-lakh-3010334
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