A bonanza awaits the middle class in the Modi government's first Budget which will be presented by finance minister Arun Jaitley on July 10.
The government may shower goodies on voters in the form of higher income tax exemption and incentives for education and home loans, sources said.
Jaitley is likely to approve a proposal to enhance the personal income tax exemption from Rs 2 lakh now to up to Rs 3 lakh. Higher taxes on super-rich, which the former UPA government had
held up, may also get approved in NDA's Budget.
A senior finance ministry official told dna, "The ministry is examining the proposal for hiking the I-T exemption limit." Sources said the earlier system of women tax payers getting higher exemption, which was removed in the 2012-13 Budget presented by the then finance minister Pranab Mukherjee, will also be reintroduced by Jaitley.
Experts, meanwhile, feel that the government indeed has a fiscal space for enhancing the exemption.
R Nangia, managing partner at tax consultancy firm Nangia and Co, told dna, "The government can easily increase the personal income tax exemption limit to Rs 2.5 lakh. Beyond that too, they will have to carefully examine the implications on the revenue stream."
The government is also examining various incentives on home and education loans. Plus the section 80C tax deductions, which allow a further Rs 1 lakh exemption is also being looked at.
"The idea behind this is that if indexed to inflation, this amount is miniscule. There is another proposal of having a similar deduction on education spend incurred by households," the official said. The amount, however, will be known only when the Budget is announced.
Experts, meanwhile, are excited that new things are being attempted by the government.
"The government is indeed keeping its cards close to its chest. But there is one thing for sure. Things are happening, and in the right direction. The government also knows that it has to avoid a situation that after listening to the Budget speech, the people say that it is old wine in a new bottle," said economist Surjit Bhalla.
One of the proposals being actively considered is of introducing the super-rich category of those earning over Rs 10 crore. This category will taxed at 35%. The UPA government tried introducing this
category but could not owing to disapproval from the council of ministers.
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