I-T exemption limit set to be Rs 5 lakh: *Monthly diesel hike of 50 paisa to continue *No increase in LPG cylinder rates: New Delhi, June 13: In a major bonanza for the salaried class, the government is likely to raise the income tax exemption limit from the current Rs 2 lakh to Rs 5 lakh in the Union Budget in July. The hike in income tax exemption limit will be a big relief for the salaried class. Under the current slabs, no tax is charged on income up to Rs 2 lakh which will go up to Rs 5 lakh. The last time the IT exemption was hiked was in March 2012 by the then Finance Minister Pranab Mukherjee in the Union Budget. The limit was hiked from Rs 1.8 lakh to Rs 2 lakh which led to savings of Rs 2,000 for every tax payer. While the Modi government will give a major relief to the middle class and the urban constituency which voted for it in huge numbers through the income tax sops, it is likely to continue the monthly diesel hike of 50 paisa a litre to cut subsidies and balance the fiscal situation. In the beginning of June, diesel subsidy had come down to Rs 2.80 a litre and the under-recovery would be wiped out in five-six months at these levels and then diesel price could become market linked. Fuel prices, including that of petrol, are likely to remain volatile as the crisis in Iraq and the subsequent fear of disruption of crude oil supplies in the Middle East led oil prices to hit a nine-month high today at $ 115 a barrel. The surge in crude oil prices will put more pressure on the subsidy burden which the government is trying to cut. The unrest in Iraq hit the stock markets today as the BSE Sensex fell by almost 350 points, the biggest single-day drop in over four months. LPG prices may also be under strain if crude surge continues. However, Petroleum Minister Dharmendra Pradhan said there would not be any increase in prices and the number of refills given to consumers will continue. Along with IT exemption, there have been demands from industry and other quarters to raise the tax exemption on home loans and health insurance premiums.