Exciting Update for Salaried Taxpayers: Standard Deduction Limit Raised to Rs 90,000 in Interim Budget

Middle-class taxpayers are anticipating a boost in the standard deduction, potentially up to Rs 90,000, in the upcoming Interim Budget 2024, scheduled for February 1. Currently, the standard deduction stands at Rs 50,000 for salaried taxpayers. If this adjustment occurs, it will bring significant relief to salaried individuals through reduced income tax obligations.

Under the Income Tax Act, taxpayers can claim various deductions and rebates. One such benefit available to salaried individuals is the standard deduction. This deduction allows for a flat deduction of Rs 50,000 from the total annual salary. As of the financial year 2023-24, salaried taxpayers qualify for this standard deduction of Rs 50,000 under the new tax regime.

The standard deduction was last revised nearly five years ago, in 2019. In the upcoming Interim Budget 2024, middle-class taxpayers are hopeful that the government will introduce tax incentives. Recent reports suggest that the government may increase the standard deduction to Rs 90,000 in the budget.

Why Increase the Standard Deduction Limit?

1. Addressing Inflation: With inflation persisting, the current standard deduction falls short of covering the rising living expenses faced by salaried individuals.

2. Equity in Tax Benefits: Raising the standard deduction aligns the tax benefits for employees with those available to individuals earning from business or profession, who can deduct related expenses.

3. Impact of Remote Work: The shift to remote work has led to increased spending on home office setups. A higher standard deduction would help offset these additional expenses.

4. Impact on Indirect Taxes: An increase in standard deductions would enable salaried individuals to spend more, indirectly boosting the government's GST revenue through increased consumer spending.

Who Can Claim a Standard Deduction?

The standard deduction can be claimed by individuals who earn a salary or pension, except for business owners. However, there are some cases where eligibility for the standard deduction does not apply, including:

- Married individuals filing separately when one spouse itemizes deductions.

- Taxpayers with dual status or non-resident alien status for a specific tax year.

- Taxpayers filing returns for a period of less than one year.

Could the Standard Deduction Increase to Rs 90,000?

Numerous tax experts suggest that the standard deduction might rise to Rs 90,000. This means the government could raise the limit from Rs 50,000 to Rs 90,000 in the interim budget. If this occurs, it could lead to significant savings for taxpayers.

Also Read: Interim Union Budget 2024 Embraces Digitalization: Transition to Paperless Operations and Mobile App Accessibility

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