SBI ICRAP: Providing relief to middle class and salaried workers at a cost of 28,500 crore

The government has been increasing the limit of income tax exemption from time to time. This limit was Rs 22 thousand in 1990-91 which has now reached Rs 2.5 lakhs. In other words, there is no income tax on annual income of up to two lakh rupees.

New Delhi: Finance Minister Arun Jaitley can give big relief to salaried and middle class only at the cost of Rs 28,500 crore. It is to say that the draft of the tax rebate in ECRIP, prepared under the leadership of Chief Financial Advisor of State Bank of India, Soumya Kanti Ghosh, has been presented. 

Income tax rebate

According to the report, the government has been increasing the limit of income tax exemption from time to time. This limit was Rs 22 thousand in 1990-91 which has now reached Rs 2.5 lakhs. In other words, there is no income tax on annual income of up to two lakh rupees. Now the impression is getting stronger that this limit should be increased to three lakh rupees. The report claims that after raising the limit of 50 thousand rupees, the taxpayer will be exempted from the income tax of 75 lakh, although the government will have a loss of about Rs 9.3 billion. Keep in mind that according to the latest data from the income tax department, the number of income tax assesses has crossed 60 million, but half of them are disturbing, which also do not have tax liability of one rupee.

In the report, it has been advocated to increase the exemption limit of income tax from the deposit / investment up to Rs 1.5 lakh under Section 80C of Income Tax. This limit should be increased from 1.5 lakh rupees to two lakh rupees. Keep in mind that if you deposit or invest 1.5 lakhs as the original amount paid in the National Savings Certificate (NSC), Public Provident Fund (PPF), life insurance or home loan, then during the calculation of income tax, Your total income is deducted from. Income tax is calculated according to the slab on the remaining amount. 

Home loan relief

Under the other section of income tax, income tax is also exempted in lieu of the interest paid on home loan. Under the existing arrangement, the amount of home loan up to Rs 1.5 lakh and interest of up to Rs two lakhs, i.e. a total of three and a half lakh rupees, is reduced by the total amount before the calculation of income tax. It has been suggested in the report that the amount of interest should be increased from two to two and a half lakh rupees. If this happens, about 75 lakh people who take home loans will benefit. 

Bank deposit

There is no income tax on the annual amount of up to Rs 10,000 from the bank deposit. The report believes that these limits need to be increased. On the other hand, for the income tax exemption, a period of up to 1.5 lakh rupees can be deposited up to five years. SBI EcoRP believes that these facilities should be available for a fixed deposit of up to three years. At the same time, the amount received should be completely tax free at the time of maturity. To do this, the government's treasury will be burdened with just Rs. 3500 crores.

Table 1

financial year	Exemption limit
1990-91	22,000
1992-93	28,000
1993-94	30,000
1994-95	35,000
1995-96	40,000
1998-99	50,000
2007-08	1,10,000
2009-10	1,60,000
2011-12	1,80,000
2012-13	2,00,000
2014-15	2,50,000 Table 2 Limit of income tax exemption Existing Budget possible Slabs (in lacs) Tax rate (in%) Slabs (in lacs) Tax rate (in%) 0-2.5 0 0.3 0 2.5-5 5 3-5 5 5-10 20 5-10 20 10+ 30 10+ 30 Impact on government treasury 9,500 crores