Here’s what people expect on income tax from the upcoming Indian budget

As the interim budget approaches, there is widespread hope that the Modi government will change income tax slabs.

Last year’s budget did not alter the income tax slabs in any way and the exemption limit and the income tax rates continued like before till date. Over the past interim budgets, the central governments awaiting the elections did not announce any major steps. Nevertheless, reports now suggest that the Modi government may break the convention this time in order to woo voters.

It’s being widely speculated the government might double the income tax exemption threshold from the present Rs 2.5 lakh to Rs 5 lakh according to an IANS report. It is also possible that Jaitley might restore the tax-free status of the medical expenses and transport allowances, reported the news agency, quoting the government sources.

As the PTI reports, raising the income tax exemption limit to ₹ 5 lakh per annum is one of the major demands that the Confederation of Indian Industry (CII). The industry chamber has also pressed to increase the deduction under 80C to Rs 2.50 lakhs which is believed to encourage more investments.

Another suggestion made by the CII while expecting the interim budget is to bring down the highest personal income tax rate from 30% to 25% which will give room for exemptions towards medical expenses and transport allowances.

If the income tax slabs are altered before releasing the Direct Tax Code report on February 28, the process may become contentious. The new revision anticipated is expected to make the income tax rates more progressive by bringing relief to the people in the 5% and 20% slabs, reported Mint earlier on May 14.

As per the current tax slab, the income under Rs 2.5 lakh will be exempt from tax. Income between Rs 2.5 lakhs and 5 lakhs will invite 5% income tax and earnings between Rs 5 lakhs and 10 lakhs will attract 20% taxes while anything beyond 10 lakhs will be taxed at 30%.