The government is planning to increase personal income tax exemption from\nexisting Rs 2.5 lakh to Rs 3 lakh in the Union Budget 2019, according to a\nBloomberg report. The move comes at a time when the country is witnessing a\nsharp slowdown in consumer demand.<\/p>\n\n\n\n
It was earlier reported that the government would only consider raising\nincome tax deductions under certain sections of the Income Tax Act.<\/p>\n\n\n\n
However, it now seems that the government could increase the personal income\ntax threshold to Rs 3 lakh in order to provide more tax relief to people and\nboost demand.<\/p>\n\n\n\n
People familiar with the matter said finance minister Nirmala Sitharaman may\nconsider such an increase but added that the measure is yet to get a final nod.<\/p>\n\n\n\n
Experts earlier indicated that it should not come as a surprise if the\ngovernment includes a few additional measures in reducing personal income tax for\ncitizens in order to boost demand.<\/p>\n\n\n\n
The increase in personal income tax threshold will provide more flexibility\nto people and provide a boost to the economy, which recorded a growth of just\n5.8 per cent in the first quarter of 2019-20.<\/p>\n\n\n\n
If such a move is announced, salaried and working-class taxpayers would get\nat least Rs 2,500 more.<\/p>\n\n\n\n
However, the economy is in a situation where one measure would automatically\nhave a negative effect on another key aspect.<\/p>\n\n\n\n
In this case, the announcement of the proposed plan could add more pressure\non the budget deficit or fiscal deficit, which has been pegged at 3.4 per cent\nof the GDP for the current fiscal starting April 1, 2019.<\/p>\n\n\n\n
Meanwhile, the finance ministry is also believed to increase the exemption\nlimit through tax deductions for investments made under Section 80C of the\nIncome Tax Act. At present, the current ceiling of deductions under Section 80C\nis Rs 1.5 lakh. Reports suggested that the exemption limit could be increased\nto Rs 2 lakh.<\/p>\n\n\n\n
While the move would bring relief to millions of people in the country, it\nwould also trigger an increase in the fiscal deficit.<\/p>\n\n\n\n
A senior finance ministry official told Reuters that there is “no\noption but to defer fiscal consolidation” as boosting economic growth is a\ntop priority.<\/p>\n\n\n\n
It is likely the government will have to increase the fiscal deficit target\nfrom existing 3.4 per cent of the GDP to 3.6 per cent in order to accommodate\nthis move.<\/p>\n","protected":false},"excerpt":{"rendered":"
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