Parliament panel backs Rs3 lakh I-T exemption limit

A committee of members of Parliament scrutinising the Direct Taxes Code (DTC) has reached a consensus on raising the income tax exemption limit to Rs3 lakh from the current Rs1.8 lakh. The panel is also likely to recommend tax breaks on investments of up to Rs2.5 lakh.

''There is a consensus among the members that annual tax exemption limit be raised to Rs3 lakh,'' sources said after the meeting of the Parliamentary Standing Committee on Finance chaired by senior BJP leader Yashwant Sinha.

The committee wants the government to raise the income tax exemption limit to give relief to fixed income groups in view of the near double-digit inflation, which has eroded purchasing power of rupee.

The committee also wants the tax saving investment limit to be more than doubled from the current Rs1.2 lakh to Rs2.5 lakh, in order to give a big push to savings and investment.

Currently income tax is not deducted on investments in provident fund, life insurance, children's education up to a total Rs 1 lakh and another Rs20,000 on investments in infrastructure bonds.

The Standing Committee on Finance is expected to finalise its report on the Direct Taxes Code (DTC) by 2 March, ahead of the Budget. However, the final report will be presented to Parliament only in the third week of March and, hence, its recommendations are unlikely to be fully reflected in the coming budget, which will be presented on 16 March.