Budget 2025: Standard Deduction Limit will increase under Old and New Tax Regime in this Budget?
The day for the presentation of the Union Budget 2025 is arriving, and everyone, from a salaried individual to a pensioner, awaits for this budget with a hope.
The main purpose of salaried individuals waiting is that they want to know whether the Finance Minister Nirmala Sitharaman will increase the standard deduction limit to provide relief or not.
According to the latest reports, there are possibilities of an increase in the standard deduction limit to help taxpayers reduce taxable income.
At present, the limit of standard deduction is capped at Rs.50,000 under the old tax regime and Rs.75,000 under the new tax regime.
It is a very simple benefit to ease the tax burden for the taxpayer, even pensioners, who can benefit from it to offset on their taxable pension income.
Tax experts think that a jump in the limit of standard deduction could bring big relief to the taxpayers, and especially at these times of galloping inflation and rising costs of living. Under both tax regimes, increasing the standard deduction limit to Rs.1 lakh or more has been suggested as a step to boost disposable income. Again, this is likely to reflect positively on consumer spending and propel economic growth.
There have been speculations that the government may increase the deduction under the new tax regime to encourage more people to adopt it. The move would, in fact simplify tax filings and align with overall tax reform. On the other hand, with discussion on the Direct Tax Code continuing, some expert feel that the government may not introduce major changes since the new tax framework is not yet finalized.
The potential revision is also being linked to rising costs of transport and medical expenses since the reintroduction of the standard deduction in the financial year 2018-19. Proposals suggest that an increase to Rs.1.20 lakh annually would reflect these rising costs more accurately and bring parity between the old and new tax regimes.
The salaried class, particularly those in Tier 1 cities, are looking for the budget to address their grievances. Increasing the standard deduction would be the only way to bring down financial burden and enhance the spending power. It will have a cascading effect on many other sectors of the economy.
Although the decision still lies with the government but much hype surrounds related to what Budget 2025 will bring. That’s because many taxpayers would hope for tax relief, and one such increase will be in standard deduction limits; it will instantly bring relief while at the same time supporting a bigger objective on the part of the government economic growth along with consumer confidence.
