Central budget: Rebate on income tax likely

KOCHI: The Union Budget, which will be tabled in Parliament on February 1, is likely to provide a rebate on income tax. The direct tax revenue in Covid period is higher than expected, which is a positive factor. As the Covid crisis continues in the country, some benefits and concessions may be included. The budget is likely to be popular as assembly elections are being held in five states, including Uttar Pradesh and Punjab.

Expected concessions

Basic exemption

Those who work on a salary basis and have an annual income of up to Rs 2.5 lakh are not liable for income tax. Those earning up to Rs 5 lakh, subject to 100 per cent rebate under Section 87A, do not have to pay tax. The basic exemption was increased from Rs 2 lakh to Rs 2.5 lakh in 2016-17. This time it may be Rs 2.75 lakh or Rs 3 lakh. Investing in Life Insurance, Provident Fund, FD and Sukanyasamrudhi Yojana may increase the tax deduction limit on income taxable income from Rs 1.5 lakh to Rs 2 lakh.

Home loan

The interest liability of the home loan may be reduced to the limit of two and a half lakhs, which can be deducted from the income taxable income. This is currently two lakhs. There is a discount of up to Rs 25,000 on health insurance premiums. This is 50,000 for senior citizens. By depositing in the National Pension Scheme, the deduction limit can be increased up to Rs 50,000.

Income tax slabs

There is a potential for minor changes in the structure of income tax slabs. According to the current slab, those earning more than Rs 10 lakh per annum are taxed at 30 per cent. This could be fixed at 20 percent up to Rs 15 lakh and 30 per cent over Rs 15 lakh. Special benefit may be given to those who choose work from home.

Corporate tax

The tax is 15 per cent for manufacturing companies that are registered after 2019 and will be operational by 2023. This may apply to companies that have been registered since 2021 and will be operational by 2025.