The government is mulling an increase in the standard deduction limit available to salaried taxpayers and pensioners by 30-35% in the upcoming budget while income tax slabs are likely to remain unchanged given the limited fiscal headroom, officials said.
At present, Rs 50,000 standard deduction is allowed to these category of taxpayers. Industry bodies have suggested increasing it.
“There are many suggestions on personal taxation. This year one common demand was to enhance the limit of standard deduction, especially considering inflated cost of medical expenses on account of Covid-19,” a senior official from the finance ministry told ET. “The proposal is to increase it by 30-35%.”
The proposal is subject to final approval, depending on the latest tax collection situation, the person said.
There is no standard deduction available for taxpayers who opt for the new tax regime.
A standard deduction of Rs 40,000 was introduced in 2018 by the then finance minister, the late Arun Jaitley and was later enhanced to Rs 50,000 by Piyush Goyal in the interim budget in 2019.
With the Covid-19 pandemic increasing at-home expenses of salaried class such as electricity and communication, there have been demands for some relief to taxpayers.