NEW DELHI: If you’re expecting tax cuts in the upcoming Budget, you may be disappointed. According to two highly placed sources, both of them part of Budget discussions, the Budget will be reformist and not populist. For one, income tax slabs are likely to remain unchanged for individual taxpayers. While tweaks in exemptions are likely, the overall limit is unlikely to be raised. However, many structural reforms may be unleashed aimed at boosting tax collection.
“Unlike the previous government, this government is targeting reforms at the tax collection level. The process for filing returns will be simplified. Another area of focus is to widen the tax net to protect the interest of honest taxpayers,” said a senior Finance Ministry official.
The official said that while the government would not alter individual tax slabs, there may be some changes in exemptions. At the moment, the maximum tax exemption allowed via Section 80C of the Income Tax Act is Rs 1.5 lakh.
The government may also increase entitlements under medical expenses, health insurance, and investment in infrastructure bonds, the official added. As of now, exemption up to Rs 15,000 per annum is allowed on medical reimbursements paid by the employer.
The government recognises the fact that this is not commensurate with rising medical costs, he added.Another highly placed source, who is a member of the Prime Minister’s Economic Advisory Council, said, “The government will continue with the reform process, keeping in view fiscal prudence. The discussions suggest that even while the government is planning to simplify income tax laws, there may not be any change in individual tax slabs.”
He, too, confirmed that the Budget is set to increase tax exemption on medical reimbursement. He said the Budget may increase the exemption limit of health insurance premium under family insurance to include more people to be covered under health insurance.
1)Increase in tax exemption for medical reimbursement from the current Rs 15,000
2)Increase in tax exemption limits for life insurance term plan
3)Increase in tax exemption for health insurance under family insurance plan
4)FD taxation may be brought on a par with debt mutual funds