Ahead of the Budget, a key Parliamentary panel scrutinising the Direct Taxes Code (DTC) is likely to recommend raising of income tax exemption limit to Rs 3 lakh and tax breaks on investments of Rs 2.5 lakh. "There is a consensus among members that annual tax exemption limit be raised to Rs 3 lakh," sources said after the Parliamentary Standing Committee on Finance meeting, chaired by senior BJP leader Yashwant Sinha.
Raising the tax exemption limit from Rs 1.8 lakh currently, they said, was necessary to provide relief to the people braving the impact of high inflation.
Members also felt the total tax saving deduction limit, which include investment in provident fund, life insurance, children education and infrastructure bonds, should be raised to Rs 2.5 lakh from Rs 1.2 lakh, sources said.
At present, investments up to Rs 1 lakh in specified instruments are deducted while calculating the tax liability. In addition, investments up to Rs 20,000 in infrastructure bonds are also exempted from tax.
The Standing Committee on Finance has decided to finalise its report on DTC by March 2, enabling Parliament to consider the ambitious reforms in direct tax regime in the budget session beginning March 12.
"The committee will present its report to Parliament in the third week of March", sources said.
The DTC Bill proposes the tax exemption limit of Rs 2 lakh and also provides for revising the tax slabs for all the three categories.
Currently, income of Rs 1.80-5 lakh attracts 10 per cent tax, Rs 5-8 lakh 20 per cent and above Rs 8 lakh, 30 per cent. The DTC, which will replace the Income Tax Act, 1961, was referred to the Committee for scrutiny in August 2010.
Yesterday, Congress leaders in their wishlist asked Finance Minister Pranab Mukherjee to present a "please all" Budget and raise income tax slabs.