In a move to assuage the common man for the demonetisation hardship he has put up with, the Centre is considering increasing the income tax threshold in the coming fiscal.
“An increase in the personal income tax threshold by at least a few thousand rupees and further easing of compliance measures for individual taxpayers are on the cards. This will add a feel good factor to the Budget,” said a person privy to the development.
The Finance Ministry is understood to be looking at raising the income tax threshold by Rs. 20,000 to Rs. 50,000. However, the proposal has to be balanced by available revenue space and a final decision is likely to be taken closer to the Budget date.
At present, individual assesses do not have to pay any tax on income up to Rs. 2.5 lakh a year. The threshold is even higher for senior citizens at Rs. 3 lakh a year; it is Rs. 5 lakh for those above 80.
Finance Minister Arun Jaitley, in his first Budget of 2014-15, raised the threshold by Rs. 50,000 from Rs. 2 lakh to Rs. 2.5 lakh for individual taxpayers and to Rs. 3 lakh for senior citizens. This time, however, expectations are higher as it would give the common people, who have been queuing outside ATMs for money, more income for consumption. This would help boost demand that seems to be under pressure after the demonetisation.
As an added incentive, the Finance Ministry is also looking at further easing the compliance burden on individual assessees. “Most processes such as filing and refunds are already online. The objective will be to further cut the physical interface between the taxpayer and the department,” said the source while cautioning that this may have to be balanced by the requirement of more disclosures in the Income Tax Return forms.
Panel for e-scrutiny
The Central Board of Direct Taxes recently set up a committee to formulate a ‘Standard Assessment Procedure’ for e-scrutiny, which would provide more transparency and certainty to taxpayers.
Experts and industry chambers have suggested raising the I-T threshold along with more sops for cashless transactions. CII, in its pre-Budget memorandum, had urged the government to revise the exemption limit due to the rise in the cost of living. “The income trigger for peak rate in other countries is significantly higher,” it said.