Budget 2021: Finance Minister Nirmala Sitharaman will present the Budget 2021 on February 1, Monday, and expectations are high that the Narendra Modi-led government may bring much-needed relief to the pandemic-hit middle-class. Since scores of people lost their jobs and had to undergo salary cuts due to the pandemic, the Centre is reportedly looking at possible ways to raise the basic tax exemption limit for an individual income tax payee (to Rs 5 lakh from Rs 2.50 lakh at present), in a bid to enhance net disposable income in the hands of taxpayers.
Speaking to a leading business portal, Sandeep Jhunjhunwala, Director, Nangia Andersen LLP said that the hopes of individual taxpayers, this time are exceptionally high.
“Post the enactment of the ordinance that introduced corporate tax rate cuts, the individual taxpayers are hoping for similar fiscal benefits”, Financial Expess quoted him as saying.
At present, the basic exemption limit is Rs 2.5 lakh per annum and income between Rs 2.5-5 lakh is taxed at 5 per cent. Those in the income bracket of Rs 5-10 lakh are taxed at 20 per cent and those above Rs 10 lakh are taxed at 30 per cent rate. There is also a three-layered surcharge for the super-rich in the salary brackets of Rs 1 crore, Rs 2 crore, and Rs 5 crore.
In the 2019 interim Budget, the Centre had proposed a rebate on all payable taxes if an individual’s taxable income is up to Rs 5 lakh per annum. But it kept the basic exemption levels unchanged. Even in Budget 2020, the basic exemption limit remained unchanged even though the government provided some relief to taxpayers by allowing them to choose between the existing tax regime and an (optional) alternative new tax regime with lower rates sans exemptions.
If reports are to be believed, the finance ministry, in the upcoming Budget, may hike the exception limit under Section 80C to Rs 2 lakh from Rs 1.5 lakh. Talking to Business Today, a source in the Income Tax (I-T) department asserted that changes to the exemption limits in the personal income tax have been discussed.
“Tax exemption limit of Rs 1.5 lakh on savings is likely to be reworked. It may go up to Rs 2 lakh”, a source told the portal.