Budget 2024: Standard deduction under new tax regime may be increased, says report

The Finance Ministry is exploring the option to raise standard deduction limit for income taxpayers who have opted to be assessed under the new tax regime, as per a media report.

An official reaction to the news was awaited. The development could not be independently verified.

The report comes ahead of the release of Union Budget 2024-25. Finance Minister Nirmala Sitharaman is expected to present the budget in the third week of July.

Standard deduction

At present, the government allows salaried taxpayers to claim a standard deduction of ₹50,000 from their taxable income. Till financial year 2022-23, this option was available only for those taxed under the old regime.

However, from FY23 onwards, taxpayers assessed under the new regime -- which is the default regime now -- are also allowed to claim a standard deduction of ₹50,000.

Tweak in income tax rates on cards?

The government could slash the income tax rate for those earning an annual income between ₹5 lakh to ₹15 lakh, news agency Bloomberg reported on June 21, citing sources.

The finance ministry may also consider lowering the tax rate for those in the highest bracket -- earning above ₹15 lakh per annum -- to boost consumption, Reuters reported last week, citing persons privy to the development. This category of taxpayers are charged at a rate of 30% under the new tax regime.

As per the old tax regime, a levy of 30% is imposed on those earning above ₹10 lakh. However, those opting to be taxed under the old regime are allowed to claim higher tax deductions.

In the pre-budget consultations held earlier this week, the Confederation of Indian Industries (CII) had reportedly suggested the government to lower the income tax rates to boost consumption.