With rise in personal disposable income post 7th Pay Commission, the income tax exemption limit needs to be raised by Rs 50,000 to Rs 3 lakh, a SBI report said on Monday.
The move will benefit around 75 lakh people, it said.
The SBI’s Ecowrap report further said that if the exemption limit of interest payments under housing loan is increased to Rs 2.5 lakhs for existing home loan buyers, from Rs 2 lakhs now, it will benefit 75 lakh home loan buyers and cost the government just about Rs 7,500 crore.
Finance Minister Arun Jaitley is set to present the fifth and final full budget of the current government on February 1.
The government has periodically increased the income tax slabs from Rs 22,000 in 1990-91 to Rs 2.5 lakh in 2014-15.
“Due to 7th pay commission, the personal disposable income has been increased, so we believe there is a need to raise the exemption limit to Rs 3 lakh. Due to such increase in limit, around 75 lakh tax payers will be exempted from income tax,” said the report — ‘Union Budget: If wishes were horses!’.
It has also pitched for incentivising savings through bank deposits.
In an effort to incentivise savings, it said, the government can exempt interest of savings bank deposits.
The exemption limit on TDS on interest on term deposits with banks may be raised from the present limit of Rs 10,000 per annum, it said.
Also, the lock-in period for tax savings term deposits needs to be reduced to 3 years from the present 5 years and these deposits should be brought under EEE (exempt, exempt, exempt) tax regime.
The SBI report said that SBI’s expectations regarding the forthcoming budget are based upon principle of inclusive growth and meeting the medium and long term objectives set by the government.