Salary earners having an income of less than Rs 5 lakhs will not have to file tax returns from this year, a finance ministry official said.
"Salaried people, may be up to Rs 5 lakh...They need not file the (income tax) return," CBDT chairman Sudhir Chandra told reporters at the customary post-Budget press conference.
The exemption from filing tax returns come into effect from the assessment year 2011-12.
In case such a salary earner has income from other sources like dividend, interest etc. And does not want to file returns, he will have to disclose such income to his employer for tax deduction, Chandra said.
The government, he said, is working out a scheme and will notify it "very soon".
The Form 16 issued to salaried employees will be treated as Income Tax Return, he added.
Earlier, in the day, Finance Minister Pranab Mukherjee had proposed to exempt salaried employees from filing tax returns.
According to the Memorandum to the Finance Bill 2011, the government will be issuing a notification exempting 'classes of persons' from the requirement of furnishing income tax returns.
The decision, which will come into effect from June 1, 2011, will reduce the compliance burden on small taxpayers, it added.
Every person whose income exceeds the taxable limit is presently required to file returns.
Another finance ministry official said the decision to raise tax exemption limit of very senior citizens (80 years above) to Rs 5 lakh will benefit about 15,000 tax payers.
Mukherjee announced an increase in the income tax limit of very senior citizens to Rs 5 lakh. They will have to pay a tax of 20 per cent for income between Rs 5 lakh and Rs 8 lakh and 30 per cent beyond Rs 8 lakh.