Union Budget 2018: What you may expect on income tax front from Arun Jaitley
With Union Budget 2018 being the last full budget for the Narendra Modi government going into the Lok Sabha polls next year, it is likely to offer some relaxations to the middle class by lowering personal tax incidence especially to salaried people.
A proposal was recently made to the finance ministry calling for expanding the exemption limit from Rs 2.5 lakh per annum to Rs 3 if not Rs 5 lakh. Currently a tax of 5 per cent is applicable on annual income between Rs 2.5 and Rs 5 lakh.
Tax slabs may also be further rationalised in the Union Budget 2018. Under existing slabs, 20 per cent tax is levied on annual income of Rs 5-10 lakh while 30 per cent tax rate is applicable for personal yearly earning above 10 lakh.
In the Union Budget 2018, Arun Jaitley may announce a cut of 10 per cent tax rate for the Rs 5-10 lakh slab bringing it to 10 per cent. A new tax slab may be introduced for annual income of Rs 10-20 lakh. There is no separate tax rate for this slab at present.
An income tax rate of 30 per cent may be levied on income above Rs 20 lakh raising the base of the slab from Rs 10 lakh. Industry bodies the CII and FICCI have demanded rationalisation of personal income tax slabs in their memoranda submitted to the finance ministry.
The CII even suggested bringing down the highest personal income tax rate from 30 to 25 per cent. But with uncertainty prevailing over GST collection, which has seen dips in consecutive months, the Union Budget 2018 is unlikely to incorporate such a proposal.
The CII memorandum says that the lower income group is reeling under pressure due to steep rise in cost of living accentuated by rising inflation. A tax relaxation will ease their lives and help create demand for industries. It also argued that that income trigger for peak rate in other comparable countries are higher than India.
The FICCI, too, said that more money available with the people especially in the lower and middle income group would stimulate demand for industries.
Finance Minister Arun Jaitley may re-introduce standard deduction for salaried individuals. The industry bodies have suggested giving standard deduction of at least Rs 1 lakh on salary in Union Budget 2018 to ease tax burden and give salaried employees more money in hand to deal with rising inflation. Standard deduction on salary was done away with in 2006-07.