NEW DELHI: Global consultancy KPMG said that Rs 2.5 lakh income tax exemption limit is lowest in the world and should be raised in the Budget, to leave more money in the hands of the taxpayer.
Finance Minister, Arun Jaitley, to give too many tax concessions for the common man or the industry in his first full-year Budget. The government is struggling to raise revenues and fiscal deficit targets are daunting.
Currently, as the tax slabs stand individuals under 60 years of age don’t have to pay any taxes for income up to Rs. 2.5 lakh, between Rs. 2.5- 5 lakh the tax rate is at 10 per cent, for income between Rs. 5-10 lakh it is 20 per cent and above Rs. 10 lakh it’s 30 per cent.
“Today if you look at it the Rs. 2.5 lakh tax slab is one of minimum slab rates across the globe, below which income is exempt. The need is that we should leave more money in the hands of the individuals in the households who will ultimately spend that money or save that money, which means investments,” Vikas Vasal, Partner Tax, KPMG told NDTV.
This in turn will spur demand for goods and services, which would be a win-win situation for the overall economy, he said.
However, the global consultancy is not in favour of having more tax slabs than the ones that already exist, as it would just add to confusion.
“I think as the revenue collections go up and as the tax net increases we should increase the minimum threshold limit, and accordingly revise the slab upwards,” Mr Vasal said.
Mr Jaitley could introduce a special provision in the Budget either under section 80C of the Income Tax Act or separately, where households can invest in long-term infrastructure bonds, Mr Vasal said. To boost household savings, Mr Jaitley, in his interim Budget last year, had hiked the exemption limit for investment in financial instruments under Section 80C to Rs. 1.5 lakh from Rs. 1 lakh earlier.
“I think the government can introduce a special provision either as a separate tax provision or as a part of 80C wherein the household can invest in long-term infrastructure bonds. A tax reduction of Rs. 30,000-50,000 could be given,” Mr Vasal said.
Earlier, an additional Rs. 20,000 limit was available for investment in infrastructure bonds, which was discontinued.
“80C is a great platform which achieves twin objectives. One is it offers tax deductions- some tax relief to the individuals and households – at the same time it helps direct the funds where they are required, whether it is insurance policies, infrastructure funds or long-term savings.”
