New Delhi, February 21
The government is actively contemplating increasing standard deduction, slapping higher taxes on the affluent class and doing away with exemptions on savings instruments.
Political sources in the government said the Finance Ministry is planning to increase standard deduction so that incomes up to Rs 75,000 annually would become tax free. Presently incomes up to Rs 50,000 has nil tax liability.
Plans are also afoot to establish a new income slab beyond Rs 5 lakh per annum where income tax would be charged at the rate of 33 per cent.
With the government cracking down on the high perquisites earned by the corporate employees, the new move would make a considerable dent on the pockets of such employees.
Presently there are three income slabs of Rs 50,000 to Rs 60,000 where the income tax rate is 10 per cent, Rs 60,001 to Rs 150,000 where the rate is 20 per cent and above Rs 150,000 where the rate is 30 per cent.
The sources said under the new dispensation a slab between Rs 250,000 and 500,000 may be introduced.
While an increase in the standard deduction would bring cheer to many, there is a proposal to do away with tax exemptions on instruments like insurance policies.
The sources said with privatisation of the insurance sector, the private companies were also seeking the benefits extended to government companies. This the sources said was being found difficult by the Finance Ministry to comply.
The Union Budget would also seek to reduce interest rates on small savings and provident fund by 0.50 per cent. This in turn would dilute the earnings of depositors and hit pensioners hard.
As a balm for the pensioners the sources said the Finance Minister may make a provision to protect interest rates on their savings.
