With the government exploring various options to attract long-term funds for infrastructure, savings in certain categories up to Rs 1,30,000-1,50,000 a year may qualify for income tax exemption in the coming Budget against Rs 1,00,000 currently.
Over and above Rs 1,00,000, income tax exemption might be given for another Rs 30,000-50,000, especially for infrastructure, sources told PTI. Or alternatively, there might be consolidated savings limit of Rs 1,30,000-1,50,000 they said.
The finance ministry might also go for raising zero income tax slab to Rs 1,50,000 against the current level of Rs 1,00,000, they said.
The Ministry is looking at these three options and one of them may figure in the Budget, the sources said. However, the possibility of raising the income tax slab to Rs 1,50,000 is remote, they said.
In the Budget 2005-06, Finance Minister P Chidambaram raised the savings limit to Rs 1,00,000, which would qualify for income tax exemption under Section 80 C.
The Section provides for tax exemption for investments like insurance premia, contributions to provident fund or schemes for deferred annuities, purchase of infrastructure bonds, payment of tuition fees, repayment of principal amount of housing loans.
This fiscal's budget extended these benefits to fixed deposits of five years of maturity in banks. Banks are demanding that this benefit now be extended to three years of deposits as well.
Infrastructure development requires a whopping $320 billion in the next five years. The finance ministry is evaluating various options to attract funds for infrastructure.
Recently, US-based Citi Group and Blackstone have joined hands with infrastructure finance companies--IDFC and IFCL to raise long term funds for infrastructure.
So far as the slabs are concerned, currently, income up to Rs 1,00,000 does not attract any tax with Rs 1,00,000-1,50,000 drawing tax at the rate of 10 per cent.
Income from Rs 1,50,000 -2,50,000 attract 20 per cent income tax and 30 per cent above Rs 2,50,000. Besides, there is surcharge of 10 per cent on Rs 10 lakh taxable income.
For women, income up to Rs 1,35,000 does not attract income tax and Rs 1,35,000-1,50,000 draws 10 per cent tax rate. Above this level, the tax rates are same as that for men.
Senior citizens get tax exemption up to Rs 1,85,000 and do not have 10 per cent tax slab. There is also likelihood that the Budget 2007-08 would lower the age for senior citizens from 65 years to 60 years, the sources added.
