Changes to the Income Tax Slab and Rates are expected in the Budget: Will the Rs 2.5 lakh Basic Exemption Limit be Increased?

Changes to the income tax slab and rates are expected in Budget 2022: The Union Budget 2022 is expected to provide significant tax relief to taxpayer

Changes to the income tax slab and rates are expected in Budget 2022: The Union Budget 2022 is expected to provide significant tax relief to taxpayers. The majority of respondents in a recent KPMG pre-budget study stated they expected an increase in the basic income tax exemption ceiling of Rs 2.5 lakh.

“On the individual tax front, most respondents anticipate an increase in the INR2.5 lakh basic income tax exemption level. “Respondents also support an increase in the present section 80C deduction ceiling of INR 1.5 lakh, as well as an upward revision in the top income band of INR 10 lakhs and above,” according to the poll study.

The fundamental exemption limitations were last updated in 2017-18, according to Abhishek Soni, Co-founder, and CEO of Tax2win. As a result, it is envisaged that the basic exemption ceiling would be increased in this budget, allowing middle-class taxpayers to lower their tax payments to some extent.

During the study, respondents were questioned about the most anticipated change for individual taxpayers, and the following replies were given:

• The government should raise the income cap of Rs 10 lakh at which the maximum marginal rate of 30% tax is triggered, according to 29% of respondents.
• The Section 80C deduction ceiling of Rs 1.5 lakh was hoped for by 36% of respondents.
• For the salaried class, 19% of respondents predict an increase in the standard deduction ceiling of Rs 50,000.
• With work-from-home arrangements in mind, 16 percent foresee tax-free allowances/perks for paid employees.

Limits under Sections 80C and 80D have been raised.

“The government should offer a separate deduction under Section 80C for house loan principal repayment.” For a long time, the limit under Section 80C has not been changed, and many things are already covered or qualify within the limit of Rs. 1,50,000. As a result, there’s a good chance it’ll be improved this year,” Abhishek Soni told FE Online.

“Furthermore, given the rise in real estate prices over time, the government should enable a separate deduction for principal repayment of home loans, rather than including it in the section 80C limit,” he added.

Section 80C and Section 80D limits are likely to be increased this year, according to Archit Gupta, founder and CEO of Clear. They have been the same for a long time. Additionally, substantial direct tax collections this fiscal year may aid in the modification of these ceilings upward.

“The Equity-Linked Savings Scheme (ELSS) may be allowed a bigger deduction under Section 80C, or a separate cap can be specified to promote more mutual fund investments in India,” he said.

New tax system:

The Finance Ministry, according to Archit Gupta, may modify the personal income tax slab in this year’s Budget.

“Many experts believe that the two tax regimes continue to perplex the average person. To make the new regime more appealing, the government may consider raising the maximum tax slab from Rs.15 lakh to Rs.20 lakh, or allowing certain deductions. He stated that “Budget 2021 does not bring any significant assistance to the salaried class.”