Should the income tax limit be raised?
Finance Minister Nirmala Sitharaman will present the full budget for 2024-25 on July 23. This time the middle class is expecting the government to provide some relief in income tax. Anyway, in the pre-budget discussion, representatives from different quarters have asked the government to take steps to boost demand. In such a situation, there is a possibility of giving more relief to the common man in the government’s new tax regime. But do you know how much of your income should be tax-free? Should it be Rs 10 lakh? Let’s understand this complete calculation of gold price?
If you want to know how much of your income should be tax-free, then you will have to dig a little deeper into history. One has to look at the budget of P. Chidambaram, who was the Finance Minister in 1997-98. He then gave the country a ‘dream budget’.
P. Chidambaram’s ‘dream budget’
The 1997-98 Budget is still called the “Dream Budget” because it was the first time that a simple income tax bracket was introduced in the country. The government had introduced 10, 20 and 30 per cent income tax rates. P. Chidambaram became the Finance Minister in the 1997-98 financial year. He then presented the dream budget. He introduced simple tax rates of 10, 20 and 30 per cent. At that time, income up to Rs 40,000 was tax-free, income up to Rs 60,000 was 10 per cent, up to Rs 1.5 lakh was 20 per cent and above that, a tax of 30 per cent was levied.
Then, after about 10 years, P. Chidambaram again changed this income tax limit. This time he made income up to Rs 1 lakh tax-free. While the highest tax rate of 30% was retained for those earning more than Rs 2.5 lakh. Now if you look at the gold exchange rate of this time, you will know why your income of Rs 10 lakh should be tax-free.
Connection between gold rate and income tax.
Everyone knows that due to inflation, the value of your current income reduces in the coming years. Understand it this way, if you used to earn Rs 10 lakh in 2014, today its value will be Rs 5.5 lakh, if inflation is considered to be just 6%. Therefore, investment in gold is considered the best way to deal with inflation in India.
Now, if we look at the price of gold in 2005, as per the data of the Reserve Bank of India, at that time the price of 10 grams of gold was around Rs 7000 and the price of one gram of gold was Rs 700. This is the period when their tax-free income touched Rs 1 lakh. At that time, about 143 grams of gold could be bought for Rs 1 lakh.
Now, if we look at the current times, the price of 10 grams of gold has become Rs 72,664 as per the rates of the Jewellers and Bullion Association of India on July 12. Thus, the price of one gram of gold has become Rs 7,266, i.e. now to buy 143 grams of gold you will need at least Rs 10.39 lakh. You had bought this amount of gold entirely from tax-free income. This simply means that from today your income up to Rs 10 lakh should be tax-free.
