The One of the major lookouts of the Budget 2016 will be the tax slabs and the Economic Survey 2016 suggested that tax exemption thresholds should not be raised.
The Economic Survey 2016 called for expanding the base of tax payers.
Despite the number of tax returns filed picking up from mid-1980 onwards, nearly 85 percent of the economy remains outside the tax net. Pointing out that just 5.5 percent of earning individuals are in the tax net, translating to a ratio of about 4 percent of tax payers to voters, the survey says this ratio should be raised to a desirable estimate of about 23 percent. It says that taxpaying and political participation are the two important accountability mechanisms wielded by citizens.
Making a study of the data since Independence, the survey pointed out that the exemption thresholds have been raised much more rapidly than underlying income growth resulting in a widening of the wedge between average income and threshold limit.
Bringing more and more people into the tax net via some form of direct taxation will help in realizing the promise of Indian democracy, the Economic Survey stated.
Currently, for a resident individual below 60 years of age, income up to Rs 2,50,000 is exempt from tax, income from Rs 250,001 to Rs 500,000 is taxed at 10%, from Rs 5,00,001 to Rs 10,00,000 at 20% and above Rs 10 lakh at 30%.
For residents aged 60 years or more but less than 80 years, income up to Rs 3 lakh is exempt from income tax and income from Rs 3,00,001 to Rs 5 lakh is taxed at 10% plus cess. Rest of the tax slabs, rates and cess are the same as for residents below 60 years.