Higher exemption limits for individuals likely under DTC

Taxpayers could get additional relief under the proposed overhaul of the country’s tax laws, with the finance ministry exploring options to raise the personal income tax threshold to compensate them for high prices.

At present, taxpayers do not have to pay income tax on annual income up to Rs 1,60,000 and the draft direct tax code (DTC) unveiled in August last year had kept this figure intact. But stubbornly high inflation is causing the government to have a rethink and consider amending it in the final DTC.

The proposal, still at an initial stage, involves increasing the income tax threshold by up to Rs 40,000. This could help taxpayers save as much as Rs 4,120 in taxes per year — every Rs 10,000 increase in the threshold amounts to a saving of Rs 1,030. However, the official said the final exemption limit will be based on the government’s overall revenue implications, with a decision taken later when the tax slabs are worked out.

Retail inflation, as measured by the consumer price index for industrial workers, was at 13.33% in April. This is significantly higher than wholesale price index inflation, which was at 10.12% in May. Food inflation is running at 16.12%.

The revised draft, released last week, has already given significant reprieve to individual taxpayers by retaining the tax exemption for long-term saving schemes and delinking valuation of perks from market rates. But the finance ministry plans to compensate these revenue giveaways by tightening the liberal tax slabs.
Source:Economic Times

Posted by:
Kartik gala
(Business Development)