Finance
standing panel under Yashwant Sinha had suggested slab changes
NEW
DELHI,
JUNE 13: The
upcoming Budget may put more money in people’s pockets as the Modi Government
is considering raising the income tax limit and tinkering with the existing tax slabs.
Indications
are that the exemption limit will be raised to Rs.5 lakh from the current Rs.2
lakh; meaning, people earning Rs.5 lakh or less annually will
not have to pay tax.
Currently,
tax is levied at the rate of 10 per cent on income of Rs.2-5 lakh, 20 per
cent on income of Rs.5-10 lakh and 30 per cent on income
above Rs.10 lakh (see table).
Education
cess :
Further,
there is an education cess and an additional surcharge at the rate of 10 per
cent on income exceeding Rs.1 crore.
The
previous Government had rejected the suggestion of the last Standing Committee
on Finance, headed by senior BJP leader Yashwant Sinha, that the I-T exemption
ceiling be raised to Rs.3 lakh.
The
panel had recommended nil tax for income up to Rs.3 lakh, 10 per cent for
income of Rs.3-10 lakh, 20 per cent for Rs.10-20 lakh and
30 per cent for income beyond Rs.20 lakh.
However,
the Ministry had said that the total revenue loss on account of the changes and
removal of cess would work out to around Rs.60,000 crore.
Pros
and cons :
The
argument in favour of changing the structure is that it would put more money in
the hands of people and, in turn, raise demand for various goods and services, boosting the manufacturing and
services sectors.
At
the same time, more consumption would also result in higher collection of
indirect taxes, which would compensate the fall in income-tax collection.
While
some feel that more money in the hands of people will also help them combat
inflation, economists believe that more money in circulation may actually fuel
inflation.
Source
: http://www.thehindubusinessline.com
