Mr FM – Increase basic tax exemption slab to off-set high inflation

India’s food inflation has remained in double-digits for most of the past year. The wholesale price index rose an annual 8.43% in the month. And at present the basic exemption limit of income tax does not help the common men in any way to increase their savings. From the past five years there is just slight increase in the basic exemption limit. The limit of Rs 1 lac in the year 2006-07 was raised to Rs. 1.1 lacs in the next year and to 1.5 lacs in 2008-09. The rate for 2009-10 was increased to Rs. 1.6 lacs. Last year budget had not raised the basic exemption limit, under the current rules, income up to 1.6 lakh is exempt from tax for individuals. For women and senior citizens, the limit is 1.9 lakh and 2.4 lakh, respectively.

Budget 2011 will be unveiled by the government very soon. The budget for the coming year will definitely be dominated by the effect of inflation. A common man must expect lots of “goodies” from the upcoming budget in the form of income tax measures as proposed in the Direct Taxes Code (DTC) to provide relief to inflation-hit household. The government should look to increase the basic exemption limit of tax, keeping in mind the impact of inflation on the common men who falls under the lower income group.

Widening the tax bracket helps people with higher income group to save their taxes which was seen in 2010 budget. Common men have nothing to do with the widening of tax bracket because of their lower income and as such they are concerned only with the basic exemption limit. They can avail tax relief only if there is rise in the basic exemption limit. It would help them to minimise their tax and increase their savings in the current financial position of our country where inflation has already hit their lives.

So, the finance minister must go for increase in the basic exemption limit to provide tax relief to individuals of lower strata income and make the budget meaningful for the common men.

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Alok Patnia

Founder and Director at

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