Income tax relief in Budget 2012-2013
A couple of days left for the Budget to be announced. The 'Aam Admi' would be curious to know if there will be any increase in their disposable income. Every year there is a general expectation from the individual tax payers on the budget proposals relating to personal taxation, especially on the tax rates/tax slabs. This expectation is further heightened this time due to the impact of global economic slowdown directly or indirectly impacting the growth in India and inflationary trends in the domestic market. The budget 2012-13 may bring some cheer to the Aam Admi as the government is said to be considering restructuring of income tax slabs as well as the income tax exemption limit.
According to various media reports, the new tax slabs could be in line with the Direct Taxes Code (DTC) Bill. As per the DTC Bill, income between:
- Rs 2,00,000 and Rs 5,00,000 per annum will be taxed at 10%,
- income between Rs 5,00,000 and Rs 10,00,000 will be taxed at 20% and
- income above Rs 10,00,000 will be taxed at 30%.
An increase in the basic exemption limit to Rs 2,00,000 for individuals below 65 years of age vis-a-vis the current limit of Rs 1,80,000 would be a welcome change. Currently, the highest tax rate of 30% is applicable to income above Rs 8,00,000 per year. This limit could be enhanced to Rs 10,00,000, thereby resulting in some savings and also aligning the slabs with the proposed DTC.
Despite the rejig, the taxes paid in India by individuals are still among the highest in the world. As per the recent media news, the Indian companies during their customary pre-budget meeting advised the finance ministry to retain the tax rates at existing levels but increase exemption limits to promote growth or consumer spending. A rejig in the tax rates as well as the tax slabs may encourage higher tax compliance by individuals. As India steadily progresses with the economic transition from a developing to a developed country, realignment of tax laws in line with such developments become priority for effective growth.
More on Budget
- No need to file I-T returns if salary doesn't exceed Rs5L/year
- Budget Special 2011-2012
- Budget proposal 2011-12: some relief for aam adami