In the last Budget, Finance Minister Arun Jaitley had left the slabs unchanged. But for individuals having annual income between Rs 2.5-5 lakh there was a marginal relief by reducing the rate from 10 per cent to 5 per cent.
During current budget exercise middle class can hope for a big relief in 2018-19 budget. This will also be the last regular budget of the NDA government, before the next election. Finance ministry is contemplating to hike personal tax exemption limit and tweak the tax slabs. It is hoped that the ministry will hike the tax exemption limit from the existing Rs 2.5 lakh per annum to at least Rs 3 lakh if not 5 lakh.
The changes of tax slab is also being actively considered by the ministry to give substantial relief to middle-income group. It will benefit the salaried class and will help them tide over the impact of retail inflation.
In the next Budget to be unveiled on February 1, the government could lower tax rate by 10 per cent on income between 5-10 lakh, levy 20 per cent rate for income between Rs 10-20 lakh and 30 per cent for income beyond Rs 20 lakh. At present, there is no tax slab for income between 10-20 lakh.
The industry chambers want the government to reduce peak tax slab to 25 per cent, it is unlikely that the ministry will agree to that due to pressure on fiscal deficit.
The subdued indirect tax collection following roll out of Goods and Services Tax from July 1 last year has put pressure on the fiscal deficit, which has been pegged at 3.2 per cent of the GDP for 2017-18. Therefor the government recently raised borrowing target by additional Rs 50,000 crore for the current fiscal to meet the shortfall.
Standard deduction, which was available to the salaried individuals on their taxable income, was abolished with effect from assessment year 2006-07.
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