Budget 2024: Will Government increase Standard Deduction under New Income Tax Regime?
The Ministry of Finance is considering increasing the Standard Deduction limit under the new tax regime for income tax taxpayers. The Modi Government is set to present its Union Budget for the 3rd time in a row.
It is anticipated that major changes will not happen in the capital gains mechanism and the income tax department has requested an examination of this issue. Many Suggestions have been given to align the holding time across asset classes but for now, the government is not ready to change the system.
The budget criteria discussions have just begun and the minister of finance, Nirmala Sitharaman is leading the discussion. Currently, the finance ministry is analyzing various issues and before making any final decisions on the basis of PMO’s feedback, the ministry seeking input from other government departments.
Many government departments are in favour of tax benefits for middle-class taxpayers. Earlier, the group has been a Modi government supporter but now raising concerns over the benefits received at the time of paying taxes like education and public healthcare.
What is the Standard Deduction under Income Tax?
The Standard Deduction is a fixed flat deduction given by the tax department on the total salary income earned by an individual in a financial year. This fixed amount can be subtracted from their taxable salary income without giving any proof of actual expenses by the employed individuals.
The aim of providing a standard deduction is to create fairness between salaried-income individuals and those whose earnings come from a business. Both, in old and new tax regimes, the standard deduction is applicable.
Budget 2023: Introduction of Standard Deduction in New Tax Regime
Finance Minister Nirmala Sitharaman introduced a standard deduction of Rs. 50,000 for salaried taxpayers and individuals under the new tax regime. This is for those taxpayers who are receiving income from salary.
The standard deduction of Rs. 50,000 is available in both new and old tax regimes. Furthermore, under the new tax regime rebate under Section 87A was increased for taxable income not exceeding Rs. 7 lakh. This amendment allowed individuals to be exempt from paying taxes with taxable incomes up to Rs. 7 lakh under the new tax regime.
Budget 2024: Standard Deduction should be hiked, Why?
Under the new tax regime, many exemptions and deductions are not allowed. So, increasing the standard deduction is important. These changes in the threshold of the standard deduction will encourage more taxpayers to switch or opt for a new tax regime. Increasing standard deduction will benefit more people from new tax rules, since under the new tax regime standard deduction is the one and only deduction that people can claim.
Apart from this another reason to increase the standard deduction is that the cost of living is going high because of inflation in the economy, therefore hiking the standard deduction will help people to secure their buying power. A higher standard deduction can give an opportunity to salaried individuals and retired ones to spend more money as the amount of taxable income would be less.
