I-T exemption limit may be raised to Rs 1.5 lakh in 2007

Feb. 24 - With direct tax revenues being buoyant this year, taxpayers could look forward to some relief in the form of an increase in income-tax exemption limit from Rs 1 lakh at present to Rs 1.5 lakh per annum.

According to highly placed sources in the Government, since the income-tax rates are already quite low compared to many other countries at 10 per cent, 20 per cent and 30 per cent, there is little scope for the Finance Minister, Mr P. Chidambaram, to reduce them further.

On the contrary, by raising the exemption limit from Rs 1 lakh to Rs 1.5 lakh, he would be providing relief to a large category of the lower income group among taxpayers.

This would also result in letting off a large number of marginal tax payers from the tax net, particularly in view of the rising prices that have hit the household budget of the low and middle-income group of taxpayers, the sources said.

The move is also viewed as a sort of political sop in view of the forthcoming elections in several States, particularly Uttar Pradesh, traditionally a decisive State in the political formation at the Centre.

The total direct tax collections between April 1, 2006 to February 15, 2007 stood at Rs 1,61,777 crore which is 39.5 per cent higher compared with Rs 1,15,788 crore in the same period of the previous financial year.

During this period, income tax collections, including fringe benefit, securities and banking transaction tax, stood at Rs 62,040 crore.

This represents a 32 per cent growth over collections in the corresponding period of the previous year.