In a dampener for the common man, reports suggest that the government is likely to keep income tax slabs in the forthcoming Budget 2021-22. This means any changes in personal tax rates seem off the table as of now.
However, the finance ministry is mulling tax exemptions to boost savings, healthcare and affordable housing.
It is to be noted that changes on the personal tax front as the government in 2020 introduced an alternative tax slab structure with lower tax and no exemptions.
Currently, there is no tax for those with taxable income up to Rs 2.5, 5% for those between Rs 2.5 -5 lakh, 20% for Rs 5-10 lakh annual income group, and 30% for those with income higher than Rs 10 lakh. The tax rates are slightly different in the new tax regime.
Instead of tinkering with tax slabs, the finance ministry is likely to give tax relief to encourage people to buy homes, especially in the affordable segment. The FM is reportedly mulling hiking exception limit under Section 80C to Rs 2 lakh from Rs 1.5 lakh currently. The deduction limit on health insurance premium might be increased beyond Rs 25,000.
Experts also demand that threshold tax exemption limit should be increased from 2.5 to 5 lakhs in the case of normal individual, 3 to 6 lakhs in the case of senior citizen and 5 to 8 lakhs in the case of super senior citizen and Tax rate should be 10% for income upto 10 lakhs, 20% for income more than 10 lakh but upto to 20 lakhs, 30% for income more than 20 lakhs.
Finance Minister Nirmala Sitharaman has promised a 2021 budget not seen like anything in a 100 years but faces the tough challenge of boosting spending in order to support a fragile recovery while maintaining fiscal discipline at the same time.
In such a scenario, the Union Budget 2021-22 might aspire to give further relaxations to the common man reeling under an economic contraction triggered by the pandemic.