Income Tax Exemption Limit May Finalize To Rs.3 Lakh per Year: IT

On Friday 10th February, the Parliamentary Standing Committee on Finance has recommended for hiking the exemption slab for personal income tax to Rs.3 lakh from the current Rs.1.8 lakh. Earlier, the bill had a provision for increasing the tax limit to Rs.2 lakh. But later, the committee suggested moderately higher taxes for those who earn more and greater tax relief for small taxpayers – both individuals and corporates.

According to the IT department, recent data showed that there are 300 million taxpayers in the country. Among those, 1,85,000 are earning individuals over 20 lakh per year contributing tax amount up to Rs.53,170 crore. About 2.02 crore of taxpayers from the total 3 crore fall under the income slab of Rs.0-2 lakh.

The tax payers within the income slab of Rs.0-10 lakh comprise almost 92 percent of the total tax payers and contribute only Rs.21,094 crore which is less than 40 percent of the tax revenue from the small group earning over Rs.20 lakh per annum whereas the tax payers within the income slab of Rs.10-20 lakh per year comprise about 3.35 lakh, contributing Rs.10,185 crore.

The draft report, prepared by the committee, has suggested the IT department not to diffuse their energies on such a large number of tax payers with low income potential. The Direct Tax Code (DTC), which seeks to modernize the direct taxation system, may replace the Income Tax Act, 1961. The government may incorporate some of these provisions of the proposed law that is to be unveiled in the Budget for 2012-13.