Anticipating Changes: Interim Budget 2024 and the Standard Deduction
The Interim Budget 2024, slated for tabling in Parliament on February 1, is poised to capture widespread attention, especially from taxpayers eagerly anticipating relief in income tax obligations. Media outlets are abuzz with speculations, predicting a potential hike in the standard deduction.
Understanding Standard Deduction
For salaried individuals, the standard deduction serves as a vital component of tax relief. It constitutes a flat deduction from the gross annual salary, effectively reducing the taxable income. Presently set at Rs 50,000, the standard deduction holds significance in alleviating tax liabilities.
| Income | Standard Deduction | Taxable Income |
|---|---|---|
| Rs 6,50,000 | Rs 50,000 | Rs 6,00,000 |
For instance, an individual earning Rs 6,50,000 annually would have Rs 50,000 deducted, leaving Rs 6,00,000 as the taxable income.
Case for Revision
Experts argue for a revision of the standard deduction to align with inflation and evolving economic realities. Akhil Chandna, a partner at Grant Thornton Bharat, emphasizes the necessity of increasing the deduction to mitigate the impact of rising living costs.
Quoted in an Economic Times report, Mainstay Tax Advisors partner Kuldip Kumar highlights the absence of tax breaks for expenses related to remote work, advocating for a hike to Rs 75,000 in the standard deduction to address this gap.
Recent Changes and Expectations
In the Budget 2023, Finance Minister Nirmala Sitharaman introduced significant alterations to the income tax regime, aiming to provide relief to the middle class, particularly salaried individuals.
The exemption limit saw an increase of Rs 50,000 to Rs 3 lakh, while the rebate was raised from Rs 5 lakh to Rs 7 lakh. Additionally, the standard deduction of Rs 50,000, previously applicable only to the old regime, was extended to those opting for the new regime.
Essentially, individuals earning up to Rs 7 lakh annually are exempt from tax liabilities under the revised regime.
In anticipation of the Interim Budget 2024, stakeholders await further developments, hopeful for measures that will ease tax burdens and align with changing economic dynamics.