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Ahead of the Budget, a parliamentary panel has suggested that the personal income tax slab attracting ‘nil' rate should be raised to Rs 3 lakh from the level of Rs 2 lakh proposed in the Direct Taxes Code Bill.
Simply put, the full exemption from tax on income should be hiked to Rs 3 lakh. This recommendation, although made in the context of the proposed new Direct Taxes Code, is bound to have some persuasive power with the Finance Minister, Mr Pranab Mukherjee, when he prepares the budget for 2012-13, say economy watchers.
In its report on the Direct Taxes Code Bill, the Standing Committee on Finance headed by Mr Yashwant Sinha has also suggested that higher exemption limit may be considered for women and senior citizens.
The age for senior citizens should be relaxed from 65 years to 60 years, according to the committee report submitted to the Lok Sabha Speaker, Ms Meira Kumar, here on Friday.
The Standing Committee has also suggested that the investment limit for tax savings schemes be hiked to Rs 3.20 lakhs. Once enacted into law, the Direct Taxes Code Bill will replace the existing Income Tax law.
The Parliamentary Panel has recommended some relief for small taxpayers by way of adjustments in tax slabs. The revamp of the personal income tax slabs has been suggested after factoring in the inflationary trends in the economy and the imperative to leave more disposable incomes in the hands of the individual tax payers, particularly those in the lower income bracket.
Nearly 90 per cent (about 3 crore assesses) of individual taxpayers come under the Rs 0-5 lakh income slab, without commensurate tax yield. The total tax collected in the income slab of Rs 0-10 lakh is Rs 21,094 crore and the number of taxpayers is about 2.76 crore.
The corresponding figures for the income slab of Rs 10-20 lakh is Rs 10,185 crore with only 3.35 lakh taxpayers. The tax collected for more than Rs 20 lakh income slabs is Rs 53,170 crore from mere 1,85 lakh taxpayers.
While there are 2.02 crore taxpayers in the income slab of Rs 0-2 lakh, the number decreases to 56.73 lakh taxpayers in the next income slab of Rs 2-4 lakh.
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