Budget 2019: Raising the tax exemption limit may be a smart move

While giving any exemptions in a year when the revenues are likely to miss the target may seem difficult, the political compulsions of playing to the gallery before a general election while likely tilt the scale. That said, a decision to raise the effective exemption limit to Rs 5 lakh may actually be quite a smart move. While there are a total of 68.54 lakh return filers, accounting for 13.74 percent of all filers, with incomes in the Rs 4 lakh to Rs 5 lakh band, their contribution to the total tax pie was just over 2 percent.

While these numbers are merely indicative — because only those with incomes below Rs 2.5 lakh are exempted, and those with incomes between Rs 2.5 lakh and Rs 4 lakh may not at all avail the full benefits of 80C — they demonstrate that raising the limit by Rs 1 lakh per annum will unlikely cause a big dent to the exchequer.

This lends further credence to the likelihood of such a people pleasing tax move being undertaken.