Union Budget 2020: It is expected that the government may change income slabs to provide relief in taxation to the salaried in lower and middle-income groups in the upcoming budget. Several reports suggest that Finance Minister Nirmala Sitharaman may make taxable income up to Rs 5 lakh completely tax-free. This is also one of the top demands of key industry bodies like FICCI and PHD Chamber of Commerce. In its pre-budget memorandum to Finance Ministry, the PHD Chamber suggested the government to provide full tax exemption on income below Rs 5 lakh. The industry body said that on income below Rs 5 lakh should be fully exempted from income tax to put more money in the hands of the people.
The income tax exemption on income up to Rs 5 lakh will positively impact salaried taxpayers. According to CA Samir Mittal, chairman International Trade Council in India and managing partner of Sameer Mittal & Associates LLP, full tax exemption on income up to Rs 5 lakh will give a benefit of Rs 12,500 to those earning between Rs 5-10 lakh.
“Under Finance (No. 1) Act 2019 tax rebate of up to Rs 12,500 was given for those assesses whose net taxable income does not exceed Rs 5 lakh, thereby resulting in zero tax liability. If the full tax exemption of up to Rs 5 lakh is given it shall give a benefit of Rs 12,500 to taxpayers whose taxable annual income is between Rs 5-10 lakh which is not available currently,” Mittal told FE Online.cturing) earlier this year by reducing the tax rate which should also be replicated in personal tax.
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Income up to Rs 5 lakh is effectively tax-free even now. So, how will change in tax-slab to make income up to Rs 5 lakh completely tax-free affect taxpayers? Replying to this question, Mittal said: “It is important to give relief to the taxpayers with lower- and middle-income group (with income up to Rs 10 lakh) to give boost to them and increase in the demand. The government may consider to tax income up to Rs 10 lakh at a lower rate of 10 per cent as compared to current 20 per cent for the income between Rs 5 lakh to Rs 10 lakh and may provide the full exemption till the income of 5 Lakh.
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According to Mittal, the reduction in personal tax slab shall increase the demand, resulting in better economic growth of the country, which is currently growing at a very low pace. Government already gave the benefit to the corporate sector (especially manufacturing) earlier this year by reducing the tax rate which should also be replicated in personal tax.
In Budget 2020, Mittal suggested the government should increase the income level on which the peak tax rate should be levied. “Currently the peak tax rate of 30 per cent in India is levied at the tax slab of Rs 10 lakh as compared to other countries where the peak tax rate is levied at much higher income. Indian government should consider to increase the income levels on which the peak tax rate should be levied though it shall impact their fiscal deficit but it is imperative to cover the same,” Mittal said.
The government should increase the slab to levy the peak tax rate of 30 per cent from the current Rs 10 lakh to Rs 20 Lakh. Apart from this government may strongly consider to make the tax the income up to Rs 10 lakh at a lower rate of 10 per cent as compared to current 20 per cent for the income between Rs 5 lakh to Rs 10 lakh, he added.
Source: Financial Express