Interim Budget 2019: Will Jaitley double I-T exemption limit to Rs 5 lakh?

The Union Budget will precede the unveiling of the Direct Tax Code Report on February 28.

The 2019 interim budget on February 1 is likely to bring some good news for taxpayers. Ahead of 2019 Lok Sabha elections, Finance Minister Arun Jaitley may double the income tax (I-T) exemption threshold for the salaried taxpayers from the present Rs 250,000 to Rs 500,000, according to an IANS report.

With financial apathy on the rise after demonetisation drive, this pre-poll sop tactic by the PM Narendra Modi-led government is expected to benefit the middle-class segment of the society. FM Jaitley may also reinstate a tax-free status for medical expenses and transport allowance.

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The demand to double the I-T exemption limit to Rs 500,000 was made by the Confederation of Indian Industry (CII) as one of its pre-Budget recommendations. The industry has also sought an increase in the deduction under Section 80C to Rs 250,000 to incentivise savings.

As the ruling BJP government is trying to outline its economic policy vision to remain in power, it would be interesting to see how these major changes could be made in the interim budget or vote-on-account budget, considering that not too many policy changes should be made.

As the Union Budget will precede the unveiling of the Direct Tax Code Report on February 28, tinkering with the tax slabs and rates before the release of the report will make it contentious, IANS has pointed out.

The new Direct Tax Code, which will replace the Income Tax Act of 1961, will try to bring more assessees into the tax net, make the system more equitable for different classes of taxpayers, make businesses more competitive by lowering the corporate tax rate and phase out the remaining tax exemptions that lead to litigation. It will also redefine key concepts such as income and scope of taxation.

At the moment, income up to Rs 2.5 lakh is exempt from personal income tax. Income between Rs 2.5-5 lakh attracts 5 per cent tax (see table), while that between Rs 5-10 lakh is levied with 20 per cent tax. Income above Rs 10 lakh is taxed at 30 per cent. Rs 5 lakh exemption is only applicable to individuals of over 80 years.

Business Standard