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Income tax relief: Budget 2024 may increase standard deduction

Submitted by admin on June 29th, 2024

The finance ministry is considering increasing the standard deduction limit for income taxpayers under the new regime without changing the exemption heavy old regime. The NDA government is about to present its first Budget of its third term. It’s unlikely to tinker with the capital gains mechanism, an issue the income tax department has been seeking a review on. There’s been a suggestion to align the holding period across asset classes but the government may not be inclined to disturb the status quo at least for now. This was reported by Sidhartha of TOI.

Talks on Budget have just begun with FM Nirmala Sitharaman leading the discussion. The finance ministry is now evaluating various issues and will take feedback from other government departments before taking a final call based on PMO’s feedback.

Most government departments are in favour of tax relief to taxpayers especially the middle class. This group has been a loyal supporter of the Modi regime but is now complaining about the benefits they get for the taxes they pay, public healthcare and education as reported by TOI.

Income Tax in Budget 2024: What is standard deduction

Standard deduction is a fixed amount employed individuals can claim without any proof of actual expenses. It’s to bring fairness between salary earners and business earners. Standard deduction is applicable in both old and new tax regime.

It aims to create fairness between individuals who earn income from a salary and those who earn income from a business. The standard deduction is applicable in both the old and new income tax systems.

Standard deduction was introduced in new tax regime in Budget 2023

In the 2023 Budget, the Finance Minister introduced a standard deduction of Rs 50,000 for salaried taxpayers and individuals receiving pensions under the new tax regime. This standard deduction became the default option, unless taxpayers opted out. Additionally, the rebate under Section 87A was increased for taxable incomes not exceeding Rs 7 lakh under the new tax regime. This change allowed individuals with taxable incomes up to this level to be exempt from paying taxes under the new regime. Furthermore, the highest surcharge under the new regime was also eliminated from the tax structure.

Individuals with a taxable income of over Rs 3 lakh currently have to pay 5% income tax. Industry leaders have proposed adjusting the tax rates for higher income brackets to stimulate spending. Increasing the standard deduction will benefit all salaried taxpayers, including higher-income earners, even though it will result in some lost revenue.

Increase the Standard Deduction in Budget 2024?

Well, then – why it might be a good time to climb that standard deduction%, come the ed budget? The new tax regime removes most of the deductions and exemptions under slabs. It means we better raise the standard deduction to provide a bit of relief. This step will actually make more public opt for the new income tax slab.

But there’s a very important caveat to this: the standard deduction is pretty much all anyone can claim moving forward under the new tax laws. So, if we do it more and grow its economy further the net number of people who benefit from these updated regulations will improve.

But wait, there’s more! Inflation means a never-ending increase in the cost of living, thus boosting up user Manager potential income on user Manager savings and investment is crucial.

They also do move the needle towards a more level playing-field in how we tax things. Both higher standard deduction leads to more tax relief and the benefits are even greater for people of lower/ middle-income groups.

Plus, it benefits workers and retirees because when more individuals take the standard deduction instead of itemizing their tax returns, you keep a larger chunk out of your paychecks. This frees the people up to spend more money by lowering their taxable income. And you know what that means? This spurs consumer spending which helps boost the economy. So it’s a win-win situation.

The end result is that raising the standard deduction, for the most part, makes sense and helps many people. It assists them in traversing the next tax area, keeps pace with inflation updates and provides an economic shot in their arm. So let’s do it, folks!