The Hindu Business Line : Raise basic tax exemption limit to Rs 1.5 lakh: PHDCCI

THE PHD Chamber of Commerce and Industry has urged the Government to restructure the income-tax slabs and increase the basic exemption limit for income-tax to Rs 1.5 lakh.

In its pre-budget memorandum submitted to the Finance Ministry, the chamber has said the slabs of income on which tax is levied at different rates are in a very narrow range and need to be restructured keeping in view the ground realities, including inflation.

The chamber has said that in India, the income level on which tax at maximum marginal rate is levied is far lower than income level on which maximum marginal rates are levied in a large number of developing and emerging economies. Even if the purchase parity of the rupee forms the basis, the cost of some of the basic necessities in metropolitan cities in India, such as housing, energy, transport, food products, medical care, etc, are comparable with that in most of the advanced countries. This disparity must be redressed. The maximum marginal rate of 30 per cent should be made applicable to incomes exceeding Rs 5,00,000 instead of the present level of Rs 2,50,000.

The chamber has further urged the Government to reintroduce standard deduction under the Income Tax Act as salaried individuals cannot claim other relief that are allowed to business class assessees. By allowing a deduction for genuine cost of earning to the employees, standard deduction had been a step to ensure equity amongst salary earners vis-à-vis persons drawing income from other sources such as business or profession.

The chamber has also called for immediate withdrawal of 10 per cent surcharge of Income Tax applicable on individuals having a total income above Rs 8.5 lakh as the objective for which it was introduced has been substantially fulfilled. The said surcharge was introduced as a special measure a few years ago in the wake of natural calamities such as the Gujarat earthquake and Orissa floods, or the Kargil war. The surcharge resulted in sharp increase in the effective rate of tax in India and must be withdrawn with immediate effect, said the chamber.