Tax Exemption Limit May Increase To Rs 2 Lakh In Budget 2012

Taxpayer cheer! Good news! The government is likely to increase income tax exemption limit to Rs.2 lakh from Rs.1.8 lakh in the coming budget. The Direct Taxes Code (DTC), which is being currently scrutinized by the Parliamentary Standing Committee, suggests that, income tax exemption limit be increased to Rs.2 lakh at present. It also states that the highest personal income tax-rate of 30 percent should apply only to the individuals earning annual income of above Rs.10 lakh.

The CII director appeals that basic exemption limit should be increased to Rs.2.5 lakh from Rs.1.8 lakh at present. Also the director general proposes that the tax rate of 10 percent should apply to the income in the range of Rs.2.5 lakh to Rs.6 lakh, whereas that in the next slab up to Rs.10 lakh, the tax-rate of 20 percent is recommended. However, the income range above Rs.10 lakh should be taxed at 30 percent.

The Finance Minister, will be unveiling the proposal in around mid-March as a part of budget 2012-2013. The DTC opines that, the possibility of lowering the tax rates is in view of high inflation and the fiscal constraints being faced by the government.