Income tax slab economist says exemption limit needs to be increased in budget

Income Tax Slab: Before the general budget to be presented next month, economists say that in view of the increase in inflation and cost of living, there is a need to increase the exemption limit under the Income Tax Act with tax slab and standard deduction. Is. He also said that the middle class will get the biggest relief only when inflation comes down and measures will have to be taken for this. Economic experts have advocated for simplifying the non-exempt income tax structure and reducing it from the existing seven slabs to four slabs. Finance Minister Nirmala Sitharaman will present the budget for 2023-24 on February 1. This is the last full budget of this government before the general elections next year.

Budget

Noted economist and currently Vice-Chancellor of Dr. BR Ambedkar School of Economics University, Bangalore, NR Bhanumurthy said, “It is difficult to assess what will happen to the middle class in the budget. However, any measure to bring down inflation to the level of 4 per cent would be a welcome step. As far as tax slabs and standard deduction are concerned, a case is made for the same considering the increase in the cost of living.

Income Tax

Professor Lekha Chakraborty at the National Institute of Public Finance and Policy, an economic research institute, said, “Income tax rates and tax slab revision is a complex matter. However, under Section 80C of the Income Tax Act, the investment limit can be increased from the existing Rs 1.5 lakh. This will encourage savings. However, for this, the Reserve Bank will have to solve the problem of negative interest rate (difference between the current interest rate and inflation). The most adverse effect of negative interest rate is on the middle class.

income tax slab

However, Professor Sudipto Mandal, chairman of the Center for Development Studies, says, "According to me, no major relief is expected on the income tax front in the case of salaried or middle income tax payers." In reality, these sections are by no means a disadvantaged group and in fact belong to the upper end of the income distribution of our population. However, as a relief, there may be some increase in the standard deduction limit.

income tax slab rate

Regarding the simple tax structure of seven slabs, Mandal said, “Actually there are too many tax slabs in the alternate income tax structure. In my opinion, we should have only four tax slabs. This will make things simpler. ”Bhanumurthy also said that the seven-slab tax system is somewhat complicated, it needs to be simplified. Explain that the government had introduced an alternative income tax system in the budget of 2020-21. It taxed individuals and Hindu Undivided Families (HUFs) with lower rates. However, other tax exemptions like rent allowance, housing loan interest and investment under 80C are not given in this arrangement. Where there are four slabs in the old income tax system, there are seven slabs in the alternative income tax system.

budget 2023

When asked about other relief from the budget to the middle class and common people, Bhanumurthy said, “One of the major expectations from the budget is to ensure better prospects of economic growth as growth will create more employment opportunities. Apart from this, some schemes like PM-Kisan Samman Nidhi brought during Kovid in the budget can be continued, because economic activities are not yet fully back on track and the risk to growth due to global challenges is also increasing. '

Dearness

Lekha Chakraborty, who is also a member of the governing board of the International Institute of Public Finance (IIPF), Munich, said, “Rising inflation is a significant factor affecting the middle class and the poor. Given the RBI's limitations in tackling inflation, there is a need to support people through employment guarantees and food security, along with strengthening investment in education and health through fiscal policy. These four things will be more effective than changing the tax structure through amendment in tax slabs.

GDP

Regarding the priorities in the budget, Mandal said, “The economic growth has been affected by the Kovid epidemic, on the other hand inflation remains high. However, now it is slowly softening. In such a situation, the first priority should be to accelerate economic growth. The second priority should be to promote exports to bring the current account deficit (CAD) under control which has reached close to four per cent of gross domestic product (GDP).