Feb 18, 2013 at 09:29am IST

Axe the tax: Citizens seek revision of tax exemption limit this Budget

New Delhi: In the run up to the Budget, CNN-IBN's Axe the Tax campaign looks at how does one save for their retirement and family. But the question is whether the government is encouraging the Indian citizens to put away enough.

Ten years ago, the savings exemption limit was set at Rs 1 lakh. The inflation rate was 3 per cent. In 2013, inflation has more than doubled to over 6 per cent, but the savings cap is constant. It's been a hard year for banker Puneet Gupta, with slowing growth reducing business. But at the year end his worries come closer home. Taxes eat away a large part of his salary and he has limited saving options.

"The current savings exemption limit is too low. Rs 1,00,000 is simply not enough and young professionals like me need more tax saving options," Puneet said.

The current Rs 1 lakh limit includes everything from life insurance premiums to pension funds to tuition fees. Investment in infrastructure bonds, which merited a separate exemption last year, have been brought under the Rs 1 lakh cap.

The Direct Tax Code recommends revising the tax exemption limit to Rs 3 lakh. If the government is serious about implementing the new code, it's about time it makes a start.

"The government should revise the tax limit upwards, to at least Rs 3,00,000. This means that even as people are saving more, they will also be saving on tax," Puneet said.