‘Tax saving deductions should be raised to Rs.2.50 lakh'
A Parliamentary Committee, scrutinising the Direct Taxes Code (DTC) Bill, will recommend raising the annual income-tax exemption limit to Rs.3 lakh and hiking the limit on tax breaks for investments to Rs.2.50 lakh following a broad consensus among its members.
“There is a consensus among the members that the annual tax-exemption limit be raised to Rs.3 lakh,” sources said after a meeting of the Parliamentary Standing Committee on Finance, chaired by senior BJP leader Yashwant Sinha.
Some members had earlier suggested that the annual income-tax exemption limit be raised to Rs.5 lakh from Rs.1.80 lakh at present, in view of high inflation and erosion in purchasing power of the rupee.
The DTC Bill proposes the tax exemption limit at Rs.2 lakh and also provides for revising the tax slabs for all the three categories.
At present, income in the bracket of Rs.1.80-5 lakh attracts 10 per cent tax, 20 per cent for Rs.5-8 lakh. It is 30 per cent for above Rs.8 lakh.
Members also felt that the limit for the total tax saving deductions, which include investment in provident fund, life insurance, children education and infrastructure bonds, should be raised to Rs.2.50 lakh from Rs.1.2 lakh, sources said.
At present, investments up to Rs.1 lakh in specified instruments are deducted while calculating the tax liability.
In addition, investments up to Rs.20,000 in infrastructure bonds are also exempted from tax.
To finalise report
The Standing Committee on Finance has decided to finalise its report on DTC by March 2, enabling Parliament to consider the ambitious reforms in the direct tax regime in the budget session beginning March 12.
“The committee will present its report to Parliament in the third week of March”, sources said.