Tax exemption limits could be partially tweaked, deduction limits increased
The interim budget that will be presented on February 1 is likely to be positive for middle-class taxpayers. In an interaction with Moneycontrol, Homi Mistry, partner, Deloitte India, said there could be some increases in the tax exemption limit, though too many tax sops are not expected.
“Since this is a vote-on-account, it is expected that the government may not announce too many tax sops, but some partial relief like an increase in the exemption limit by Rs 50,000 could be implemented,” he added.
At present, those earning upto Rs 2.50 lakh per annum are exempt from paying tax. Those earning above Rs 2.50 lakh upto Rs 5 lakh pay 5 percent, those earning above Rs 5 lakh upto Rs 10 lakh pay 20 percent while those earning above Rs 10 lakh pay 30 percent.
In the Union Budget 2017-18, the finance minister had announced a standard deduction of Rs 40,000 in taxable income. However, the medical and conveyance allowances were done away with.
With respect to deductions allowed for taxation purposes, Mistry said there could be some tweaks done to ensure more tax savings for the salaried class. Among individuals as well, he said it is likely that senior citizens could be given further tax incentives.
In terms of long-term capital gains (LTCG) tax, Mistry said it is unlikely that there will be tweaks in the tax rate.
Among individual schemes, the National Pension Scheme (NPS) could also see an increase in the deduction allowed to upto Rs 1 lakh. Now, an additional deduction of upto Rs 50,000 is allowed under the scheme.
Mistry added that increasing the deduction limit under NPS will make it more attractive.There are also talks of incentives being provided for digital transactions by individuals. Mistry explained that these would be beneficial in boosting electronic transactions and reducing cash-based settlements.