To reduce the taxpayers' burden, BJP-led government in its last regular budget 2018-19 is considering an increase in tax exemption limit for individuals from Rs. 2.5 lakh to Rs. 3 lakh or more.
At the same time, the finance ministry can also bring about changes in the tax slabs for providing a much needed relief to tide over the increase in retail inflation which for the November month scaled to a 15-month high of 4.88% as against the RBI's safe estimate of 4%.
As against the current tax slab rate of 20% for those with annual income in the range of Rs. 5-10 lakh, the ministry could lower rate by 10%. For those earning between Rs. 10-20 lakh can be put in the 20% bracket while 30% can be levied for income beyond Rs 20 lakh.
Currently there is no slab for income in the range of Rs. 10 lakh and 20 lakhs.
In the last budget, marginal relief by way of tax rate reduction from the erstwhile 10% to 5% was brought about for those with annual income in the range of Rs. 2.5 to 5 lakhs.
"Considering the steep rise in cost of living due to inflation, it is suggested that basic limit for exemption and other income slabs should be enhanced to give benefit to low income group. The income trigger for peak rate in other countries is significantly higher," industry chamber CII said in its memorandum to the finance ministry.
The rising crude oil prices and subdued indirect tax collection post the roll out of GST has put burden on the fiscal deficit target of the government which was pegged at 3.2% of the GDP. And to meet the shortfall, the government recently resorted to additional borrowing of Rs 50,000 crore.
The revision in income tax slab is being encouraged upon by industry bodies including Ficci as it is of the view that the effect of demonetisation may continue for some mote time and demand has to be strengthened across the economic landscape.