New Delhi, Feb. 24: A parliamentary standing committee scrutinising the Direct Taxes Code bill will recommend raising the annual income tax exemption limit to Rs 3 lakh and hiking the limit on tax breaks for investments to Rs 2.5 lakh, following a broad consensus among members.
There is a consensus among the members that the annual tax exemption limit be raised to Rs 3 lakh, sources said after the meeting of the committee, chaired by senior BJP leader Yashwant Sinha.
Some members had suggested that the annual income tax exemption limit be raised to Rs 5 lakh from Rs 1.8 lakh in view of high inflation and rupee depreciation.
The DTC bill proposes the tax exemption limit at Rs 2 lakh and also provides for revising the tax slabs for all the three categories.
At present, income in the bracket of Rs 1.80-Rs 5 lakh attracts 10 per cent tax, while it is 20 per cent for Rs 5-8 lakh and 30 per cent for above Rs 8 lakh.
Members felt the limit for the total tax saving deductions, which include investment in provident fund, life insurance, children education and infrastructure bonds, should be raised to Rs 2.5 lakh from Rs 1.2 lakh, sources said.
At present, investments up to Rs 1 lakh in specified instruments are deducted while calculating the tax liability. In addition, investments up to Rs 20,000 in infrastructure bonds are exempted from tax.
The committee has decided to finalise its report by March 2, enabling Parliament to consider the reforms in the direct tax regime in the budget session beginning March 12.