YOUR INCOME TAX EXEMPTION LIMIT MAY JUST GO UP THIS YEAR

The improvement in income tax (I-T) compliance has encouraged the finance ministry to consider an increase in the exemption limit for the country's 30 million taxpayers.The exemption limit is likely to be raised by nearly Rs 25,000 to Rs 40,000, sources said. This would mean instead of paying I-T when one’s annual salary touches Rs 1,10,000, the threshold would be Rs 1,35,000. An increase in exemption limit by Rs 10,000 translates into savings of about Rs 1,000 for every taxpayer. The tax break would cost the Government about Rs 1,500 crore.I-T rates for taxpayers were unlikely to be re-jigged once the limit was raised, sources said. "With the buoyancy in the direct tax revenue, we felt that some relief can be given to taxpayers. Otherwise, rates for taxpayers are unlikely to change," a Government official said.Tax collection grew of over 40 per cent this fiscal to touch Rs 1,64,407 crore until December 15. The finance ministry expects direct tax collection to cross Rs 3,00,000 crore this fiscal. With expectations that this trend will continue next fiscal as well, the ministry feels providing reprieve to taxpayers is a good idea.In Budget 2007-08, the Government had raised the exemption limit by Rs 10,000 to Rs 1,10,000. Finance minister P Chidambaram had said the measure was aimed at rewarding taxpayers for the increase in receipts.With the general elections are slated for 2009, the upcoming Budget might just be the last full Budget for the UPA Government. Re-setting of the income tax structure is a popular measure, and the demand for this is likely to be intense this time around. The Sixth Pay Commission will push up the tax bracket of all government employees and so, the move to raise the limit is expected to keep their tax liabilities fairly neutral. The proposal is also a part of the carrot-and-stick policy by the finance ministry, which plans to provide this relief to tax payers and at the same time focus on greater compliance.Currently, people in the slab of Rs 1,10,000 - Rs 1,50,000 pay income tax at a rate of 10 per cent on their earnings. Income between Rs 1,50,001 and Rs 2,50,000 attracts 20 per cent tax, while those earning above pay 30 per cent. This excludes the education cess of 3 per cent on the applicable rates – www.Indianexpress.com