Tax alert! Income tax return (ITR) exemption limit may be hiked from Rs 2.5 lakh to Rs 5 lakh, standard deduction to Rs 1 lakh in Budget 2021
Income tax return (ITR) exemption limit: Middle Class taxpayers may get a very big demand of theirs cleared by Finance Minister Nirmala Sitharaman as the Narendra Modi Government is expected to announce a hike in the basic tax exemption limit.
Income tax return (ITR) exemption limit: Middle Class taxpayers may get a very big demand of theirs cleared by Finance Minister Nirmala Sitharaman as the Narendra Modi Government is expected to announce a hike in the basic tax exemption limit. Sources close to IANS have reported that the Budget 2021 may take the sops announced earlier under the Atmanirbhar Bharat package to help middle class in its fight against the Covid-19 pandemic further, by raising the basic income tax return (ITR) exemption limit for an individual income tax payee to Rs 5 lakh from Rs 2.50 lakh at present in order to enhance net disposable income in their hands.
Income Tax Standard Deduction Limit to go up to Rs 1 lakh
Also on the anvil is an increase in the level of income tax standard deduction that is currently fixed at Rs 50,000. This is expected to provide relief to taxpayers as medical reimbursement and travel allowance exemption were done away from FY 2018-19 in lieu of the standard deduction. Higher levels of standard deduction will help individuals to keep with the ever-rising medical cost that has got amplified due to the pandemic and the rising fuel costs.
Sources close to IANS said that while the level of Income tax standard deduction has not been worked out, if accepted, it may go up to Rs 75,000-Rs 1,00,000 based on various pre-budget recommendations given to the Finance Ministry. Standard deductions ensure that all taxpayers have at least some income that is not subject to income tax. These generally increase each year due to inflation.
While the proposal to raise the basic tax exemption limit for individuals has come from different quarters, sources said that the Department of Revenue will take a call on it after examining the tax implications.
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Speaking on the relief coming in for the Indian middle class in the upcoming budget; Parizad Sirwalla, Partner and Head — Global Mobility Services-Tax at KPMG Assurance and Consulting LLP India said, "This would also need to be assessed on basis of the potential number of taxpayers (estimated at 3.5 crore) who may fall out of mandatory tax return filing requirement. Subsequently, the other slab rates — both under the existing and new regime — can be adjusted on basis of the revised limits in line with the progressive tax rate system India has always adopted."
In the 2019 interim budget, the Narendra Modi government had proposed a rebate on all payable taxes if an individual's taxable income is upto Rs 5 lakh per annum. But it kept the basic exemption levels unchanged. Even in budget 2020, the basic exemption limit remained unchanged even though the government provided some relief to taxpayers by allowing them to choose between the existing tax regime and an (optional) alternative new tax regime with lower rates sans exemptions.
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