Income Tax Update: The government can give a big relief to the taxpayers in the budget to be presented in July. Officials associated with the matter say that once again the scope of direct tax exemption available in the new regime can be increased. Earlier it was increased from 2.5 lakh to 3 lakh and now there are preparations to increase it to 5 lakh.
The government can make a big decision in the budget regarding income tax. It is believed that the government can directly give tax exemption up to Rs 5 lakh. Those with a salary of more than Rs 7.5 lakh will benefit from this. This reduction in income tax can be done to send more money to the middle class and increase consumption in the country. The government, excited by India’s growth rate, wants to maintain this pace. Therefore, by reducing income tax, it is emphasizing on increasing consumption by sending more money to the middle class.
According to government officials related to the matter, this exemption in income tax will be given to taxpayers who adopt the new regime. Currently, the limit of tax exemption in this regime is Rs 3 lakh, which is to be increased to Rs 5 lakh. The government can announce this exemption in the general budget to be presented in the third week of July. After the new tax exemption is implemented, thousands of rupees will be saved for those earning a salary of more than Rs 7.5 lakh. However, all other tax rates will remain the same as before and there will be no change in them.
What is the system now
Those who adopt the new tax regime currently get a direct tax exemption of up to Rs 3 lakh. After this, the tax on income up to Rs 7 lakh is rebated. Apart from this, a tax exemption of Rs 50,000 is also available as standard deduction. This means that those earning up to Rs 7.5 lakh do not have to pay any tax in the new regime. But, as soon as the income goes above Rs 7.5 lakh, the tax is calculated directly from Rs 3 lakh.
What will be the benefit of the new system
If the government gives a direct tax exemption of up to Rs 5 lakh in the budget, then tax on income above Rs 7.5 lakh will be calculated after Rs 5 lakh. According to analysts, if this system is implemented, then those earning between Rs 7.6 lakh and Rs 50 lakh will save Rs 10,400, which will also include 4 percent health and education cess.
How much savings on earning more than 50 lakhs
If a direct tax exemption of up to 5 lakhs is available, then those earning between 50 lakhs and 1 crore will get a benefit of Rs 11,440, which includes cess and 10% surcharge. Similarly, taxpayers with annual income of 1 to 2 crores will save Rs 11,960, which includes cess and 15% surcharge. Those earning more than 2 crores will also get a chance to save Rs 13,000 in tax.
What do experts say
Sonu Iyer, Tax Partner, EY India, says that giving direct tax exemption up to Rs 5 lakh can prove to be a big move by the government. This will save tax of at least Rs 10,000. Those whose salary is more than Rs 7.5 lakh will definitely benefit from this. This will bring more money in the hands of the people and the economy will also get a boost due to increased consumption. Akhil Chandana, Partner, Grand Throne India, says that taxpayers who are currently taking rebate under Section 87A of Income Tax in the new regime will get a big benefit from direct tax exemption up to Rs 5 lakh.
