At moment, income up to Rs 2.5 lakh is exempt from personal income tax.Finance Minister Arun Jaitley may double income tax exemption threshold for salaried from present Rs 2.5 lakh to Rs 5 lakh while also reinstating tax-free status for medical expenses and transport allowance, providing some relief to section already under strain since demonetisation.Though propriety demands that not too many policy changes should be made in an interim Budget, BJP government is apprehensive of possibility of a middle-class backlash in impending general elections.Hence plan to streamline tax slabs, which in any case are in consonance with coming Direct Tax Code, government sources told news agency IANS.The problem that may manifest itself is that Union Budget will precede unveiling of Direct Tax Code Report on February 28.
Tinkering with tax rates before release of report will make it contentious.The new Direct Tax Code will try to bring more assessees into tax net, make system more equitable for different classes of taxpayers, make businesses more competitive by lowering corporate tax rate, and phase out remaining tax exemptions that lead to litigation.
It will also redefine key concepts such as income and scope of taxation.At moment, income up to Rs 2.5 lakh is exempt from personal income tax.
Income between Rs 2.5 lakh and 5 lakh attracts a 5 per cent tax (see table), while that between Rs 5 lakh and Rs 10 lakh is levied with a 20 per cent tax.
Income above Rs 10 lakh is taxed at 30 per cent.
Exemption on income up to Rs 5 lakh is only applicable to individuals of over 80 years.Income Tax slabs for individual tax payers HUF (less than 60 years old) for FY 2018-19:Income Tax SlabsTax RateIncome up to Rs 2,50,000No taxIncome from Rs 2,50,000 - Rs 5,00,0005%Income from Rs 5,00,000 - 10,00,00020%Income more than Rs 10,00,00030%