Finance Minister Arun Jaitley might make a move to double the income tax exemption threshold to the salaried, which is as of now Rs 2.5 lakh to Rs 5 lakh, which would be a huge relief to the middle class.
Meanwhile resuming tax-free status for medical expenses and transport allowance, this move is being made to provide relief to this class, which was probably the worst-hit by demonetization.
The BJP government is scared of a backlash from the middle-class voters in the upcoming general elections. To avoid this blowback, the BJP is planning to streamline tax slabs, according to IANS.
However, the problem which might crop up is that the Union Budget will be placed for discussion after the unveiling of the Direct Tax Code Report on February 28. Amending the tax rates before the release of the Budget might make it contentious.
This new Direct Tax Code will attempt to bring more people under the tax net, to make the system more equal for different classes of taxpayers, to make businesses more competitive by reducing the corporate tax rate and take back the remaining tax exemptions that lead to litigation. This law is all set to redefine key concepts of income, and scope for taxation.
As of now, income up to Rs 2.5 lakh is exempted from personal income tax. However, income between Rs 2.5-5 lakh draws 5% tax, income between Rs 5-10 lakh is levied with 20 % tax. Income above Rs 10 lakh is taxed at 30 %. An exemption of Rs 5 lakh is only provided to individuals of above 80 years.
A Rs 20,000 standard deduction per annum has been replaced with for those earning above Rs 5 lakh last year under travel allowance and medical expenses. Earlier, it was tax-free medical expenses up to Rs 15,000 and transport allowance up to Rs 19,200.
Income Tax Slabs Tax Rate
Income up to Rs 2,50,000* No tax
Income from Rs 2,50,000 - Rs 5,00,000 5%
Income from Rs 5,00,000 - 10,00,000 20%
Income more than Rs 10,00,000 30%
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