The Income Tax base slab is likely to be increased from a minimum of Rs 2.5 lakh per annum to Rs 4 lakh, sources from the Finance Ministry told India Today.

The move is being seen as Narendra Modi government's efforts to ease the pain following his decision to ban old Rs 500 and Rs 1000 notes, leading to economic slowdown and insecurities.

It is expected that a formal announcement on revised tax slabs will be made by the government before the dates for the crucial Uttar Pradesh election are announced.

Meanwhile, government spokesman Frank Noronha has rejected the report about new income tax slabs. He went on to term them as 'baseless and unfounded'.

Also read: BJP welcomes Election Commission's efforts to rid parties of black money: PM Narendra Modi

Earlier, intensifying its black money hunt, the government tabled a bill to amend the Income Tax Act in the Lok Sabha today to impose more tax, penalty and surcharge on deposits made after the demonetisation drive was launched nearly three weeks ago.

The amendments provide a window to black money holders by proposing to levy a total tax, penalty and surcharge of 50 per cent on the amount deposited post-demonetisation, while higher taxes and stiffer penalty of up to 85 per cent await those who don't disclose but are caught.

The money from the scheme would be used for projects in irrigation, housing, toilets, infrastructure, primary education, primary health and livelihood so that there is justice and equality, said the Statement of Objects and Reasons of the Bill.

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