Budget to bring higher tax exemptions

PENNY-WISE: Government is exploring various options to attract long-term funds for infrastructure.

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New Delhi: With the Government exploring various options to attract long-term funds for infrastructure, savings in certain categories up to Rs 1.3-1.5 lakh a year may qualify for income tax exemption in the coming Budget against Rs 1 lakh currently.

Over and above Rs 1 lakh, income tax exemption might be given for another Rs 30,000-50,000, especially for infrastructure, sources told PTI. Or alternatively, there might be consolidated savings limit of Rs 1.3-1.5 lakh.

The Finance Ministry might also go for raising zero income tax slab to Rs 1.50 lakh against the current level of Rs 1 lakh, they said. The Ministry is looking at these three options and one of them may figure in the Budget, the sources said.

However, the possibility of raising the income tax slab to Rs 1.5 lakh is remote, they said.

In the Budget 2005-06, Finance Minister P Chidambaram raised the savings limit to Rs 1 lakh, which would qualify for income tax exemption under Section 80 C. The Section provides for tax exemption for investments like insurance premia, contributions to provident fund or schemes for deferred annuities, purchase of infrastructure bonds, payment of tuition fees, repayment of principal amount of housing loans.

This fiscal's budget extended these benefits to fixed deposits of five years maturity in banks. Banks are demanding that this benefit now be extended to three years of deposits as well.

With PTI inputs