The government may raise the income tax exemption limit in the upcoming Budget to provide some relief to the taxpayer from inflation, Goldman Sachs said today.
Income tax relief can be provided to lower income brackets to compensate for inflation. This could take the form of raising the tax exemption limit from the current Rs 1.6 lakh, it said in a report.
Presently, income up to Rs 1,60,000 is exempted from tax for individuals. For women and senior citizens, the limit is Rs 1,90,000 and Rs 2,40,000, respectively.
Inflation continues to be a concern for the common man as well as the government.
While the food inflation had touched 18.32 per cent in December, 2010, before being moderated to over 11 per cent this month, the overall inflation still stood above eight per cent as against the comfort level of 5-6 per cent.
Goldman also expects the fiscal deficit for the current fiscal to reduce to 4.9 per cent of the GDP against 5.5 per cent estimated in Budget 2010-11.
The reduction is largely due to the windfall on 3G telecom auctions and disinvestment proceeds.
“For 2011-12, even with revenue measures and slower growth in expenditures, we expect the central deficit to be slightly higher at 5 per cent of GDP, largely as the one-off revenues would be considerably reduced”, it said.
The government mobilised over Rs 100,000 crore from the 3G and Broadband Wireless Access (BWA) auctions in the current fiscal.
Besides, the government raised over Rs 15,000 crore by listing Coal India on the bourses, apart from Rs 6,000 crore from Powergrid Corporation, MOIL , Engineers India , Shipping Corporation and Satluj Jal Vidyut Nigam Ltd, taking the disinvestment proceeds to over Rs 21,000 crore.