Income Tax Exemption From Budget 2008

Income Tax Exemption From Budget 2008 include issues related to various segments of the taxation system in the country. Many charitable establishments indulging in commercial activities are exempted from income tax. The income tax exemption is likely to be removed. This step, reckoned by government officers, is a part and parcel of budget 2008-09. It is believed that the Indian government is also speculating that tax exemptions availed by certain companies in the country should be altered or modified. In the year 2006-07, the government had exempted taxes on a number of occasions. Due to exemptions in taxes, the corporate sector incurred a revenue loss of Rs 50,000 crores. Studies reveal that this loss in revenue was approximately 44% more the loss incurred in the previous year.

There are certain commercial organizations, which perform charitable activities. As mentioned above, these establishments were exempted from the payment of income tax because these organizations had applied for tax exemptions after registering as per Section 12A of Income Tax Act 1961. The Central Board of Direct Taxes or the CBDT has been monitoring the activities of these organizations closely. The CBDT holds the opinion that in the disguise of charity, these establishments may be indulging in the misappropriation of funds by being registered under the Section 12A thereby avoiding tax payment. Expectations about Income Tax Exemption From Budget 2008 also include bringing about changes pertaining to the tax application in matters related to these establishments. It is expected that the budget 2008 would redefine the role of these charitable organizations by law, failing which would subject the tax departments to more incidence of loss over the years.

The government is expected to increase the limit of tax exemption. It is being anticipated that the limit is likely to be increased to Rs 1,50,000 from Rs 40,000. It is ascertained that all senior tax officers are looking forward to this move of the Indian government in the forthcoming budget of 2008-2009.

In the budget of 2006-07, P. Chidambaram, the Finance Minister had increased the limit of exemption on personal income to Rs 1,10,000 from Rs 10,000. In this context, it may be mentioned that this led to very little saving . A tax payer could approximately save only Rs 1000 (in taxes) as a result.

In the event of the implementation of the new measure, a tax payer would approximately pay Rs.9000 less as taxes. This amount of saving could be done provided the individual has an income of Rs 2,00,000 annually.

By increasing the limit of exemption, rate of inflation can also be taken care of.