In order to put more money in the hands of the tax payer, the Finance Ministry is likely to provide tax relief of up to Rs 80,000 per annum in total tax liability.
Sources informed CNBC-TV18 that on the basis of discussion during budget exercise there is strong possibility income tax payers may get relief between Rs 50,000 to Rs 80,000 in the total tax liability.
CNBC reported that the government may change slabs for the new tax regime launched during the last budget. If one chooses the new regime, income tax would be applicable at a lower rate, but the person will have to forgo certain permissible exemptions and deductions available under old income tax regime.
However, tax experts suggest there is not much enthusiasm among taxpayers for new system. So, to make it more popular, the coming budget may introduce certain changes in the slab rate of the new regime, which will give more headroom for payers to save taxes.
At present, for an income of up to 2.5 lakh there is no tax, between 2.5 lakh to 5 Lakh there is 5 per cent tax, for 5 to 7.5 lakh it is 10 per cent, for 7.5 to 10 lakh it is 15 per cent, for 10 lakh to 12.5 lakh it is 20 per cent, for 12.5 to 15 lakh it is 25 per cent and for 15 lakh and above 30 per cent tax is applicable for individual tax payers up to 60 years of age.
The Centre may increase standard deduction under old income tax regime.
The standard deduction is an amount that is deducted from an individual’s salaried taxable income, thus reducing the taxable income. Finance Minister Nirmala Sitharaman, in Budget 2020, had added three income tax slabs in the tax structure to incentivise more savings.
The Federation of Indian Chambers of Commerce and Industry (FICCI) was quoted as saying in a Livemint report that the standard deduction for salaried employees should be increased to Rs 1 lakh. Citing the expenses incurred by employees in setting up home offices, FICCI said that the Centre should consider such a raise in the limit. The Confederation of Indian Industry (CII) has also said that the limit of standard deduction should be hiked substantially due to rising inflation.
The report quoted Aditya Chopra, Managing Partner of Victoriam Legalis, as saying that for taxpayers awaiting a pleasant surprise at a time when the economy is battered by the pandemic, the announcement could be a "rabbit in the hat moment".