New Delhi: Industry body FICCI has demanded that the highest income tax rate of 30 percent should be levied on income above Rs 20 lakh as against Rs 10 lakh currently from next fiscal to encourage consumption.
This needs to be re-visited as the tax rate of 30.9 percent (inclusive of education cess) on income of Rs 10 lakh and above casts a sizeable burden on the middle class, reducing the disposal surplus in their hands for consumption spending," the chamber said in its pre-Budget memorandum to the Finance Ministry.
It suggested that the maximum rate of personal income tax of 30 percent be made applicable to income of over Rs 20 lakh from the financial year 2013-14.
In recent years, it said, the personal income taxation has been streamlined resulting in reduction of tax liability at all levels, but has not gone far enough.
The chamber, under its new President Naina Lal Kidwai, also suggested to reinstate the standard deduction for salaried employees to at least Rs 50,000 to ease the tax burden of the employees.
Also, "the Government may look at increasing the overall deduction limit under section 80C to at least Rs 2 lakh to boost further investment and increase tax savings for the individual," FICCI added.
With the property prices and interest rates rising steeply, it said, there is a need to revise the deduction limit to at least Rs 2.5 lakh per annum in harmony with the prevailing high interest rates.
FICCI further recommends that there is a need to de-link deduction for educational expenditure for children from Section 80C and provide under a separate provision like Section 80D of the Act for medical insurance.
Tuition fee is eligible for deduction under section 80C of the Income Tax Act. The Chamber is also for raising the tax exemption limit on expenditure in medical treatment.