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As the Budget approaches taxpayers are eager to see what benefits the Finance Minister might announce. One key area of interest is the potential increase in the standard deduction limit. Reintroduced in the 2018 Budget, the standard deduction of Rs 40,000 for salaried individuals replaced the earlier travel allowance (Rs 19,200) and medical deduction (Rs 15,000). In the 2019 interim budget, this limit was raised to Rs 50,000. However, since the combined total of the old deductions was Rs 34,200, the current limit offers only a slight increase in savings. Many experts believe the upcoming budget could see this standard deduction increased to Rs 1 lakh per annum.
Know more about Standard Deduction?
The standard deduction is a flat amount that salaried individuals can deduct from their income without needing to provide proof to their employer or the IT Department. Currently, this deduction is up to Rs 50,000 per year and is available to all employees, whether in the private or government sector, regardless of their salary. This deduction, previously available only under the old tax regime, has been extended to the new regime starting FY 2023-24.
The standard deduction also applies to pension income, provided it is classified under “Income from Salaries.” It does not apply when a pension is received by dependents after the pensioner’s death.
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Potential Increase in Standard Deduction
Many believe the standard deduction should be increased to Rs 1 lakh per annum to provide more substantial tax relief and boost disposable income.
Experts like Amarpal S. Chadha suggests that increasing the deduction to Rs 1 lakh would help taxpayers save significantly more.
Akhil Chandna is a Partner at Grant Thornton Bharat anticipates that a higher standard deduction would provide much-needed relief to taxpayers.
With these considerations in mind, many are hopeful that the upcoming Budget will bring a much-needed increase in the standard deduction, helping to ease the financial burden on salaried taxpayers.
