New Delhi: The Union Budget to be presented by Union Finance Minister Arun Jaitley in Parliament next Monday is likely to provide some relief to the middle class by raising income tax slabs, sources have said.
The lowest income tax slab is likely to be raised from Rs 2.5 lakh to Rs 3 lakh, which means income up to Rs 3 lakh is likely to be exempt from Income Tax. There are also indications that even the higher IT slabs may be re-jigged.
This could act as a fillip for electronic and household items, consumer products among others.
The interest exemption on home loans is also likely to move up from the current Rs 2 lakh, in a bid to revive the housing sector.
The Centre is also likely to enhance bank recapitalisation from Rs 25,000 cr to Rs 30,000cr. This comes in the background of news that twenty-nine state-owned banks have written off a total of Rs 1.14 lakh crore of bad debts between financial years 2013 and 2015.
Surprisingly, despite the big salary bill caused by the 7th Pay Commission recommendations, the Centre is optimistic of a fiscal deficit target of 3.5%.
This move comes at a time when opinion - from RBI Governor Raghuram Rajan to former Finance Minister P Chidambaram to rating agencies- were strongly in favour of sticking to fiscal deficit targets.
The government expects that spectrum auctions in the next financial year will provide it the necessary legroom for such a step. The outgo from the Pay Commission recommendations is also likely to be pruned by Rs 15-25 thousand crore from the present 74,000 crore.
The government is also planning to seek feedback from experts on ensuring fiscal discipline.
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