Ahead of the Union budget, industry bodies have submitted their recommendations to the government including easing the tax burden on individual taxpayers. While ASSOCHAM demanded raising the basic exemption limit for income taxpayers to Rs 5 lakh, FICCI has called for raising the limit for the peak tax slab of 30 per cent to only those earning more than Rs 20 lakh.
The present exemption limit is at Rs 2.5 lakh, though there were expectations that it would be raised to Rs 5 lakh in the last couple of years. “Considering the inflation over the years, tax exemption limit should be increased from Rs 2,50,000 to Rs 5,00,000,” says the memorandum submitted to the finance ministry by ASSOCHAM. However, in the interim budget, then finance minister Piyush Goyal had announced a full tax rebate for individual taxpayers having a taxable annual income of Rs 5 lakh.
Meanwhile, FICCI has suggested raising this to just Rs 3 lakh, though its memo has a lot to say about the upper tax bracket. “Currently, the peak tax rate of 30 per cent is made applicable over an income of Rs 10 lakhs for individual taxpayers. However, the income level on which peak rate is applied in other countries is significantly higher. Hence, there is a need for further raising the income level on which the peak tax rate would trigger, to make the same compatible with international standards,” says FICCI's submission to the government. It proposes tax rate of 3 per cent to 5 per cent for those earning up to Rs 5 lakh, 10 per cent for those who earn up to Rs 10 lakh, 20 per cent for those earning between Rs 10-20 lakh and a recommendation to charge the peak 30 per cent tax rate only from those earning more than Rs 20 lakh a year.
FICCI also recommends abolition of 'rich tax', the tax surcharge of 10 per cent and 20 per cent on those earning more than Rs 50 lakh and Rs 1 crore respectively. “(This) distorts equity, discourages entrepreneurship and incentivises people to relocate to other locations,” it notes.
ASSOCHAM also proposed that standard deduction be reinstated in the statute, citing disparity between salaried class and those in business resulting in higher tax being paid by the salaried employees. “Approximately 20 per cent of the gross salary, subject to a maximum limit of, say, Rs 1,00,000, could be considered for the purpose of standard deduction.”
To leave more disposable income in the hands of common taxpayer, it has also suggested tax reliefs on different heads like medical expenses, leave travel expenses etc. It pointed out that Leave Travel Concession (LTC) is currently limited to travel, and should cover exemption for accommodation and food as significant costs are incurred on these heads during the travel.
Besides, to promote savings, the pre-budget memorandum also called for deduction under section 80C to be raised from Rs 1.5 lakh to Rs 3 lakh per annum.