| Rising compliance, buoyant collections may prompt this move |
| |
| In a move that could spread cheer among over 30
million individual taxpayers in the country, senior income tax
officials are in favour of raising the existing exemption limit by Rs
40,000 to Rs 1,50,000 or even higher in the coming Budget. |
| |
| The tax proposals for the annual Budget are
finalised only in February, but income tax officials said raising the
exemption limit is possible given rising tax compliance levels and a
significant upsurge in direct tax collections on the back of a booming
economy and better administration. |
| |
| “There is scope to raise the exemption limit. The
government can raise the first income tax slab to Rs 1,50,001-Rs
2,00,000 per yearâ€, he said. |
| |
| The other two slabs may also be tweaked. |
| |
Finance Minister P Chidambaram had raised the
exemption limit on personal income by Rs 10,000 to Rs 1,10,000 in
Budget 2006-07. However, officials said the move translated into a tax
saving of only Rs 1,000 for an individual, which is minor in today’s
context of high incomes and prices.
| CURRENT PERSONAL INCOME TAX SLABS AND RATES |
| Income |
Tax rates (%) |
| Up to Rs 1,10,000 |
Zero |
| Rs 1,10,001 to Rs 1,50,000 |
10 |
| Rs 1,50,001 to Rs 2,50,000 |
20 |
| Rs 2,50,001 and above |
30 |
| DIRECT TAX COLLECTIONS (Rs/crore) |
| Year |
Direct tax |
Y-o-Y growth (%) |
| 2003-04 |
1,05,088 |
26.48 |
| 2004-05 |
1,32,771 |
26.34 |
| 2005-06 |
1,65,208 |
24.43 |
| 2006-07 |
2,30,091 |
39.27 |
| 2007-08* |
3,22,000 |
40.00 |
* Expected growth rate
Direct
tax includes personal income tax and corporation tax. Personal income
tax accounts for 35% of direct income tax collections | |
| |
| If implemented, the increased exemption slab will
save a taxpayer up to Rs 9,000 in taxes for income up to Rs 2,00,000
per year. |
| |
| If income up to Rs 1,50,001 is exempted and tax
levied at 10 per cent, the tax incidence will come down to Rs 5,000, a
saving of over 64 per cent. |
| |
| “An increase in the exemption limit by Rs 40,000
will be a positive step, especially taking into account the way
inflation has been increasing over the last several years,†said Gaurav
Taneja, partner, Ernst & Young. |
| |
| Direct tax collections are expected to increase by
40 per cent in 2007-08 to over Rs 3,22,000 crore, the second year of
such growth in a row. |
CAclubindia
