Mon. Jul 15th, 2024

Budget 2024: Higher standard deduction limit possible under new tax regime

By admin Jun25,2024

The finance ministry is looking at the possibility of raising the standard deduction limit for income taxpayers under the new tax regime, Times of India wrote.


What is standard deduction?

Standard deduction refers to a specific portion of the total income you earn that is free from being taxed. This is an all-encompassing estimate of all tax deductions a salaried employee can claim.

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All taxable salaried people are eligible for standard deduction and its purpose is to relieve employers from the efforts involved in collecting the bills of employees to claim tax exemptions.

However, the government is keeping the exemption-laced older regime untouched, according to the report.

Also Read | Budget 2024: Finance minister Nirmala Sitharaman to increase income tax exemption limit?

The background

The overall mood indicates that most parts of the government are in favour of offering concessions to taxpayers, especially the middle class, which has been a supporter of the Modi regime, but is increasingly questioning the returns it gets for the tax it pays, be it through public healthcare or education, the article read.

The current numbers

In the 2023 budget, Finance Minister Nirmala Sitharaman introduced a standard deduction of 50,000 for salaried taxpayers and for pensioners, under the new tax regime, which became the default option, unless you opted out.

Rebates was also increased under the new tax regime for taxable incomes not exceeding 7 lakh, allowing those earning up to this level (taxable income) to not pay any tax under the new regime.

The highest surcharge was also removed under the new regime.

Currently, individuals with a taxable income of above 3 lakh have to pay 5% income tax. Industry leaders have suggested tweaking the rates in the higher brackets to boost consumption, according to the report.

Also Read | Income tax returns: False HRA while filing ITR could cost you this much

The outlook

A higher standard deduction will benefit all the salaried taxpayers, including those in the upper segment although it will entail some revenue loss for the government, the report read.

As the NDA govt readies to present the first budget of its third term, it is unlikely to undertake major tweaks in capital gains mechanism, an issue on which the income tax department has been seeking a review, according to the report.

There have been suggestions to align the holding period across asset classes but govt may not be inclined to disturb the system, at least for the moment, the report read.

Also Read | Income Tax Return (ITR) 2023-24: 6 Essential points and 6 tips for error-free filing

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