New Delhi: The union government may increase the standard Income Tax deduction meant for tax relief to the salaried individuals, however, it is unlikely that it will tweak the current tax slabs due to limited fiscal headroom, as per media report.
As per an Economic Times report, the government is mulling to revise and increase the standard deduction of salaried taxpayers by 30-35 percent. Currently, the standard deduction is at Rs 50,000 and industry bodies have suggested that this should be increased.
“There are many suggestions on personal taxation. This year one common demand was to enhance the limit of the standard deduction, especially considering the inflated cost of medical expenses on account of Covid-19,” a senior official from the finance ministry told ET. “The proposal is to increase it by 30-35%.”
The issue is subject to government approval which will depend on the latest tax collection.
Standard deduction means the flat deduction which is made on every taxpaying individual receiving a salary or a pension. The deductions were introduced in Budget 2018 in lieu of exemption of transport allowance and reimbursement of miscellaneous medical expenses. Later for FY 2019-20 and FY 2020-21, the limit of the standard deduction was increased from Rs 40,000 to Rs 50,000.
The tax deduction helps in Income tax calculation as the salaries are computed after deducting Rs 50,000 annually, thus giving tax benefits to the taxpayer. It is only applicable for individuals who opt for the old tax regime.
Ina pre-budget meeting trade bodies like ASSOCHAM and Confederation of Indian Industries (CII) suggested the Finance Ministry to increase the deduction limit, as COVID-19 pandemic has increased the home expense of the salaried class due to increased electricity, water, Internet and other medical bills.
However, there has been no confirmation from the Finance Ministry in the matter.