Anticipating Union Budget 2024: Potential Increase in Standard Deduction for Salaried Individuals

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As the Union Budget 2024 approaches, there is a buzz surrounding the potential increase in the standard deduction for salaried individuals. The standard deduction of Rs 50,000, introduced in Budget 2018, is a flat deduction available to individuals earning salary and pension. This deduction replaced the earlier travel allowance of Rs 19,200 and medical deduction of Rs 15,000 per annum. Since then, there have been ongoing demands to raise this limit, as the combined total of the replaced deductions was Rs 34,200.

In the interim budget of 2019, the standard deduction limit was raised to Rs 50,000. However, experts argue that this limit offers only marginal additional savings to taxpayers. There is a growing expectation that in the upcoming budget, the Finance Minister might consider increasing the standard deduction to up to Rs 1 lakh per annum.

What exactly is standard deduction and why is it significant for taxpayers? It is a flat deduction available to individuals earning salary without the need for submitting any proof or documents. The standard deduction of up to Rs 50,000 per year is allowed when computing income under the head ‘salaries’ for all employees, whether in the private or government sector.

Starting from FY 2023-24, salaried taxpayers are eligible for a standard deduction of Rs 50,000 under the new tax regime. This deduction is also applicable to income from pension if it falls under the head ‘Income from Salaries’.

The suggestion to increase the standard deduction to Rs 1 lakh per annum has gained traction among tax experts and industry leaders. Amarpl S. Chadha, Tax Partner at EY India, believes that raising the limit to Rs 1 lakh would boost disposable income for taxpayers. Similar sentiments are shared by Akhil Chandna, Partner at Grant Thornton Bharat, who emphasizes the need to provide relief to taxpayers amidst rising inflation.

Some experts argue that increasing the standard deduction limit is crucial to ensure equity between salaried individuals and those with business income. Chander Talreja, partner at Vialto Partners, suggests a conservative increase of Rs 25,000 to create parity in tax benefits.

Overall, the potential increase in the standard deduction in the upcoming Union Budget 2024 holds promise for salaried individuals, offering the possibility of higher disposable income and tax savings.