New Delhi, June 25: With just a week to prepare the budget for fiscal year 2019-20 (FY20), which will be presented on 5 July, there is a huge expectation from the new Finance Minister Nirmala Sitharaman who will set the stage for reforms over the next five years, especially regarding the income tax exemptions.
For the past five years there have been some bold moves by the Government to increase the taxpayer base, curb tax evasion and make tax administration simpler.
However, it is expected that approach of the Modi 2.0 Government is not likely to change in the next five years but will surely see more bold steps to steady and grow the economy, boost tax collections and make several digital interventions in administration of taxes.
In the interim budget, the then finance minister had announced full tax rebate for income up to Rs 5 Lakh but the tax slab remained unchanged and that's why the filing of the Income-tax return is still mandatory.
It should be noted that the basic exemption limit of Rs 2.5 lakh has never been revised ever since 2014.
The present slab rates, even though recently reduced from 10 per cent to 5 per cent for income from Rs 2.5 lakh up to Rs 5 lakh, jumps to 20 per cent for the next income slab of Rs 5 lakh plus up to Rs 10 lakh .
The government could consider rationalising the slabs and the basic exemption limit could be increased to 3 lakh.
But there are also reports that it is unlikely to raise the current basic income tax exemption limit of Rs 2.5 lakh, as the Finance Ministry has already announced a provision whereby individuals earning up to Rs 5 lakh can get full tax rebate under Section 87A.
The move may come as a big disappointment for the salaried class and taxpayers in the forthcoming Union Budget 2019.
It is learnt that the Tax experts have suggested to the Finance Minister in their pre-Budget meeting that raising the basic income tax exemption level would not prove to be a wise move since the Narendra Modi-led government's focus has been on increasing the country's taxpayer base. Therefore, there are minimum chances that the government would tinker with income tax rules in the upcoming budget.