New Delhi, Jan. 16: In what would bring some cheer to the tax payer, the government could increase the personal income-tax exemption level in the forthcoming Union Budget. Rising prices over the past year or so, which have pushed up the cost of living sharply, are believed to be the cause.
The tax exemption limit, below which there would be no income-tax, may be raised by `10,000, ahead of direct tax code (DTC), which is expected to be implemented in 2012.
As of now, the exemption limit stands at `1.6 lakh for men and `1.9 lakh for women. This change, if made, would put just an extra `1,000 a year in your pocket — which may not go a long way given the way prices have gone up recently.
The draft DTC, which is currently with the Parliament, also envisages an exempt limit of `2 lakh per annum for men and women. “There is a discussion going on in the government as to how to provide relief to the people who are facing the problem of high inflation for some time now. One of the possibilities being considered is to increase the personal income-tax exemption level in the Budget,” says a senior government functionary.
The past few months have seen a sharp increase in the cost of living as prices have shot up. Food price inflation, which measures the price increase for food items, is at 17 per cent. The wholesale price index is also up at 8.43 per cent.
Experts feel that these numbers underestimate the actual increase in cost of living for the common man. There is also speculation that the Reserve Bank of India may hike policy rates as well, pushing up interest rates on loans. So the government is trying to woo the working and middle class through tax breaks.
Apart from the petrol price hike on Saturday night, other necessities such as fruits, vegetables, eggs, and milk have also become more expensive.
Onions, which had seen prices cross `100 a kg, have become a symbol of the galloping prices. In spite of imports, prices are yet to come down to the pre-spike levels.
Economists don’t think that inflation will come down anytime soon to a comfortable level.
A Citi India research report, released last week said that inflation is likely to remain high at 6.5 to seven per cent in the next fiscal also.