Good News For Salaried Taxpayers! Standard Deduction Limit Likely To Be Raised To Rs 90,000 In Interim Budget

Middle-class taxpayers are expecting an increase in standard deduction to up to Rs 90,000 in the the Interim Budget 2024 which is just around the corner. Currently, the standard deduction limit is set as Rs 50,000 for salaried taxpayers. If this happens it will come as a big relief to salaried taxpayers in the form of income tax concessions.

The Finance Minister Nirmala Sitharaman is scheduled to present the interim budget 2024 on February 1. The Income Tax Act offers number of ways through which one can claim deductions and rebates. One such deduction offered to salaried individuals is the standard deduction. Standard deduction is a provision in the Income Tax Act that allows a flat deduction of Rs. 50000 from the total salary earned by the employee in a particular financial year. Salaried taxpayers are now eligible for the standard deduction of Rs. 50,000 under new tax regime from FY 2023-24.

Standard deduction was last revised almost five years back in 2019. In ths interim budget 2024, middle-class taxpayers are eagerly hoping that the government will roll out some tax sops. Meanwhile, various reports have highlighted that the government can likely raise the standard deduction to Rs 90,000 in the budget.

Will the standard deduction increase to Rs 90,000?

Many tax experts believe that this will now increase to Rs 90,000. That is, the government can increase this limit from Rs 50,000 to Rs 90,000 in the interim budget. If this happens, it can prove to be a big saving for taxpayers.

Why is there a need to increase Standard deduction limit?

1. Rising inflation: With inflation still not under control, the current standard deduction seems inadequate to meet the escalating living costs for salaried individuals.
2. Equity in tax benefits: Increasing the standard deduction is in line with the tax benefits for job earners with those deriving income from business or profession, who can claim deductions for related expenses.
3. Work-from-home dynamics: Many organizations have now adopted remote work culture. Increased spending on home office infrastructure also calls for a higher standard deduction to offset these expenses.
4. Rise in indirect taxes: Hike in standard deductions will help people who earn a salary spend more on things, indirectly boosting the government's GST revenue.

Who is eligible to claim a standard deduction?

The standard salary deduction can be claimed by individuals receiving salary and pension, excluding business owners. However, there are certain cases where eligibility for standard salary deduction is not applicable, including:

• Married individuals filing separately if the spouse itemizes deductions.
• Taxpayers with dual status or non-resident alien status during a specific fiscal year.
• Taxpayers filing returns for a period less than one year.