Budget 2024 Expectations: Standard Deduction and Income Tax Relief
Salaried individuals await the Interim Budget 2024 with bated breath, hoping for some respite in income tax. However, expectations of an increase in the standard deduction have not been met, leaving many disappointed.
Standard Deduction Status
| Last Revision | Amount |
|---|---|
| 2019 | Rs 50,000 |
The standard deduction remains fixed at Rs 50,000, unchanged for all income levels, since 2019. Despite previous revisions, the current stagnant status has left salaried individuals without additional relief.
Impact on Salaried Employees
The standard deduction, acting as a uniform tax relief, reduces the tax burden for those earning a salary. For instance, on an annual salary of Rs 7,50,000, a deduction of Rs 50,000 lowers the taxable amount to Rs 7,00,000, easing the tax liability.
Experts advocate for a revision in the application of standard deduction, proposing it as a percentage of an individual’s salary income. This adjustment aims to ensure fair and equal benefits for all employed individuals.
Insights from Anand Rathi Advisors
Anand Rathi Advisors Limited (ARAL) released a comprehensive report shedding light on the impact of taxation on household consumption. The report emphasizes the need for tax relief for the middle class and provides recommendations to alleviate the burden.
Key Findings:
- Growing Consumer Population: Urbanization and increasing disposable income contribute to heightened consumer spending, expected to reach ~Rs 370 trillion by 2030.
- Favorable Demographics: Rising retail participation in capital markets and increased equity trading volumes indicate a positive trend in savings and investments.
- Need for Increased Standard Deduction: Salaried taxpayers, particularly those in middle and lower-income groups, would benefit from an enhanced standard deduction, providing relief from the tax burden.
Source: Anand Rathi Research
In a statement, Samir Bahl, CEO of investment banking at Anand Rathi Advisors, emphasized the necessity of increasing the standard deduction to mitigate the financial strain caused by inflation and rising living costs. Atul Thakkar, director of investment banking, proposed considering standard deduction as a percentage of total salary income to stimulate spending and consumption, ultimately boosting government revenue.
As the anticipation builds for the Interim Budget 2024, taxpayers remain hopeful for meaningful tax reforms, including adjustments to the standard deduction to provide much-needed relief.