Budget 2018 Could Bring a Change in Income Tax Limits
On February 1, 2018, the entire nation would be glued to their televisions as the Finance Minister Mr. Arun Jaitely presents the Union Budget 2018. This is the fifth budget being unveiled by the present government and is considered the most critical in their term.With major reforms such as GST Act, demonetisation, RERA, Jan Dhan Accounts, affordable housing, etc. that have swept our economy for past two years, the general public and economic experts are now looking at reaping the benefits of these milestones. The current government goes into elections next year and therefore, there are major expectations from this budget. One major expectation is the reduction in Income tax charges and limits.
Tax rates in India are one of the highest in world, particularly corporate and indirect tax rates. Even taxation on individuals is complex and quite high for an emerging market. India stands at 10th position and nine positions are occupied by developed or very robust large economies. Budget 2017 had tried to lower the individual taxation by introducing a slab of 5%. The present slab gives exemption up till Rs. 2.5 lakhs which are increased to Rs. 3 lakhs for senior citizens. There is another category of taxpayers introduced in the form of Super Senior citizens that comprise of individuals who are more than 80 years of age.Increase in Exemption Limit A survey was undertaken by global accounting and financial counseling company, Ernst & Young where it surveyed more than 150 finance officer, tax chiefs and CFOs. 69% of the respondents felt that the limit of maximum exempt income should be increased in budget 2018 in order to leave taxpayers with higher disposable incomes. Another piece of news in Business Today indicated that Income Tax exemption might be raised to Rs. 3 lakhs or more from the present Rs. 2.5 lakhs. Some more optimistic reports that are emerging place this amount at Rs. 5 lakhs! This move, if implemented shall benefit over 75 lakhs taxpayers.Increasing Number of Slabs:Last year an additional slab of 5% was introduced thereby reducing the tax burden on a middle-income group that earned up to Rs. 5 lakhs in a financial year. A similar step can be taken this year as well where the overall tax rate is further decreased by introducing a slab by breaking down a slab with a higher rate. Replace Multiple Deductions: Tax rules and deductions for individual taxation in India are unbelievably complex. In fact, this is one of the leading reasons why many people refrain from filing returns in the first place. The survey above revealed that 59% of those surveyed agreed that system of multiple rate cuts and numerous deductions should be replaced with one standard deduction. This will simplify the tax computation and may even widen the taxpayer base.