New Delhi: In what will bring relief to salary class hit by price rise, Bharatiya Janta Party led NDA government could increase personal income tax exemption limit and double the tax breaks given for specific investments and expenditure under 80C.
Currently earnings upto Rs 2 lakh annually do not attract any income tax. Government is looking to increase this personal income tax exemption limit to upto Rs 2.30 lakh, said sources. Also, presently investments upto Rs 1 lakh in specific schemes — five years bank fixed deposit, life insurance premiums, deposit in Public Provident Fund and some postal deposits and three years close ended equity mutual fund schemes — and expenditures are given tax breaks under Sections 80C, 80CC and 80 CCC of the Income Tax Act.
Sources said that the government is looking to increase this limit to Rs 2 lakh in the forthcoming budget.
This is being done to increase the saving rate, which has recently fallen as price rise has hit the ability of middle class to save.
Currently an individual falling under 30 per cent income tax bracket, can save upto Rs 30,000 in a year if he invests or spends upto Rs 1 lakh in schemes which are notified under these sections.
The savings rate of India has come down from over 38 per cent of GDP in 2008 to 30 per cent in 2012-13. According to sources, even Sebi has recommended to the finance ministry to increase the tax saving investments limit.
There have been demands from bankers and insurers too to hike tax breaks given on the investments and expenditure from Rs 1 lakh per annum to encourage household savings.
In its manifesto BJP had promised to rationalise and simplify the tax regime in the country.
Infact, even in its election manifesto of 2009, the BJP had promised to exempt personal income-tax for all those who earned up to Rs 3 lakh per annum and complete exemption on interest income on bank deposits by individuals.
The Union Budget for 2014-15 will be presented by finance minister Arun Jaitley in the Lok Sabha on July 10.
