Giving some relief to tax payers, Finance Minister Pranab Mukherjee on Friday proposed raising the income tax exemption limit for individuals to Rs. 2 lakh per annum from Rs. 1.80 lakh.
Unveiling the Budget proposals for 2012-13 in the Lok Sabha, he also increased the limit to Rs. 10 lakh under the 20 per cent tax slab. The current limit is Rs. 8 lakh.
“My proposals on direct taxes are estimated to result in a net revenue loss of Rs. 4,500 crore for the year,” Mr. Mukherjee said.
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The Budget also exempt up to Rs. 10,000 of interest income from tax.
Individuals will have to pay 10 per cent tax on income between Rs. 2 lakh and Rs. 5 lakh; 20 per cent between Rs. 5 lakh and Rs. 10 lakh; and 30 per cent for above Rs. 10 lakh.
Mr. Mukherjee said increasing the exemption limit is a move towards implementation of the Direct Taxes Code (DTC).
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The Standing Committee of Parliament that has scrutinised the DTC Bill had suggested raising the tax exemption limit to Rs. 3 lakh.
The exemption limit for the senior citizens between 60 and 80 years of age will be Rs. 2.50 lakh; 10 per cent will be levied on income between Rs. 2.5-5 lakh, 20 per cent between Rs. 5-10 lakh and 30 per cent above Rs. 10 lakh.
For very Senior Citizens (80 years and above), the income tax exemption limit will be Rs. 5 lakh; 20 per cent will be levied on income between Rs. 5-10 lakh and 30 per cent for above Rs. 10 lakh.
On implementation of DTC, Mr. Mukherjee said, “We received the report of the Parliamentary Standing Committee on March 9, 2012. We will examine the report expeditiously and take steps for enactment of DTC at the earliest.”
The DTC Bill seeks to replace the half-a-century-old Income Tax Act, 1961.
The savings bank account deductions, Mr. Mukherjee said, will help small tax payers.
“This would help a large number of small tax payers with salary income of up to Rs. 5 lakh and interest from savings bank accounts up to Rs. 10,000, as they would not be required to file income tax returns,” Mr. Mukherjee said.