Budget Expectation: Income tax relief is expected in the general budget to be presented in February. The government is keen to keep the new tax regime free of exemptions, while it is considering giving concessions by increasing the limit and reshuffling the slabs.
Budget Expectation: Income tax relief is expected in the Union Budget to be presented in February. The government is keen to keep the new tax regime free of exemptions, while it is considering providing concessions by raising thresholds and reshuffling slabs. Income tax rates are usually among the last set of announcements to be finalised and are usually redrafted before each budget. This year too the situation is no different. Companies and economists are citing weak demand, especially for the middle class, to reduce liability.
Last year, Finance Minister Nirmala Sitharaman had increased the standard deduction for salaried individuals to Rs 75,000 and also revised the slabs and said that all the changes announced by her would lead to a benefit of Rs 17,500. This time there has been a discussion in the government to further increase the standard deduction and to deal with the growing demand of leaving more money in the pockets of the middle class, proposals have been discussed to reduce the liability in all slabs including high-income sectors.
While the Centre is focused on reducing rates in the new tax regime, there is also talk of providing higher concessions for expenses such as health insurance and pension. There has been a growing demand in some quarters to scrap the old tax regime, which is seen as beneficial for those who have allowances such as house rent and home loans.
If this happens, the government will lose Rs 50,000 crore
According to a Times of India report, the SBI report has made a case for providing exemption on health insurance up to Rs 50,000 and NPS contributions up to Rs 75,000 or Rs 1 lakh. If the top rate is retained at 30% with a 15% levy for those with taxable income of Rs 10-15 lakh (as against 20% for Rs 12-15 lakh at present), the Centre will lose Rs 16,000 crore to Rs 50,000 crore annually.
If the top rate is reduced to 25% from 30% for those with annual taxable income of Rs 15 lakh or more, along with a health insurance exemption of Rs 50,000 and NPS contribution of Rs 75,000 per year, the revenue loss would be between Rs 74,000 crore and Rs 1.1 lakh crore.
The third scenario is if the top rate is reduced to 25% for those with an income of Rs 10-15 lakh, along with a 15% levy for health cover and Rs 50,000 exemption for NPS, the revenue loss is estimated to be between Rs 85,000 crore and Rs 1.2 lakh crore.
Suggestions have also been made to benefit home loans under the new tax regime. However, government officials are against giving concessions and exemptions, arguing that this will gradually lead to a reversion to the new system. Also, he suggested that options should be available and taxpayers can choose the one that is beneficial to them.
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