FM wary of high tax exemptions: No perks for salaried class this Budget?

Prime Minister Narendra Modi-led NDA government’s maiden Budget is unlikely to offer perks for the salaried class as finance minister Arun Jaitley has limited room for big bold moves this year.According to CNBC-TV18, Jaitley may not announce any major tax exemptions for professionals due to lack of fiscal space.

There are high hopes from the new government that it will raise tax slabs and also significantly hike the annual tax exemption limit to provide much-needed relief to the salaried class, which is reeling under stubbornly high inflation. Sources, however, told _CNBC-TV’_s Shereen Bhan that the finance ministry is wary of the impact of high exemptions on the fiscal gap.

A hike in exemption from the currently Rs 2 lakh to Rs 5 lakh will cost the exchequer Rs 64,000 crore, while raising 80C deduction limit from Rs 1 lakh to Rs 3 lakh will lead to the government losing out on Rs 40,000 crore in tax revenues. However, sources told CNBC-TV18 that the finance ministry may raise the housing loan interest exemption from Rs 1.5 lakh to Rs 3 lakh, as it will not lead to major revenue loss.

The government will also crack the whip on improving tax collections. The Budget is likely to highlight the need to improve India’s tax to GDP ratio, which is currently one of the lowest int he world.

The government is also unlikely to repeal the current retrospective tax law since Jaitley wants to send a clear signal of the government’s intent to end the era of retro changes and ensure that investors believe India is open for business. Hence, Jaitley is most likely to promise astable policy regime for businesses in India.