Budget 2012: No tax for income up to Rs2 lakh pa

Giving some relief to tax payers, Finance Minister Pranab Mukherjee on Friday proposed raising the income tax exemption limit for individuals to Rs2 lakh per annum from Rs1.80 lakh.

Unveiling the Budget proposals for 2012-13 in the Lok Sabha, he also increased the limit to Rs10 lakh under the 20% tax slab. The current limit is Rs8 lakh.

"My proposals on direct taxes are estimated to result in a net revenue loss of Rs4,500 crore for the year," Mukherjee said.

The Budget also exempt up to Rs10,000 of interest income from tax.

Individual will have to pay 10% tax on income between Rs2 lakh and Rs5 lakh; 20% between Rs5 lakh and Rs10 lakh; and 30% for above Rs10 lakh.

Mukherjee said increasing the exemption limit is a move towards implementation of the Direct Taxes Code (DTC).

The Standing Committee of Parliament that has scrutinised the DTC Bill had suggested raising the tax exemption limit to Rs3 lakh.

The exemption limit for the senior citizens between 60 and 80 yeaRsof age will be Rs2.50 lakh; 10% will be levied on income between Rs2.5-5 lakh, 20% between Rs5-10 lakh and 30% above Rs10 lakh.  

For very Senior Citizens (80 years and above), the income tax exemption limit will be Rs5 lakh; 20% will be levied on income between Rs5-10 lakh and 30% for above Rs10 lakh.

On implementation of DTC, Mukherjee said, "We received the report of the Parliamentary Standing Committee on March 9, 2012. We will examine the report expeditiously and take steps for enactment of DTC at the earliest."

The DTC Bill seeks to replace the half-a-century-old Income Tax Act, 1961.

The savings bank account deductions, Mukherjee said, will help small tax payers.

"This would help a large number of small tax payers with salary income of up to Rs5 lakh and interest from savings bank accounts up to Rs10,000, as they would not be required to file income tax returns," Mukherjee said.