Budget 2024: Ease income tax exemption limit to ₹5 lakh, raise standard deduction, says EY

Ahead of the rollout of the Union Budget 2024 next month, global accountancy major Ernst & Young (EY) urged the government to raise income tax exemption limit to ₹5 lakh, and allow a standard deduction of ₹3 lakh, in order to raise the disposable income of the taxpayers.

Both the recommendations were issued by EY in respect to the new tax regime. At present, an income up to ₹3 lakh is exempted from taxation under the new regime.

For those earning between ₹3 lakh and ₹15 lakh, an income tax in the range of 5%-20% is levied, and the maximum tax of 30% is levied on those earning above ₹15 lakh.

Standard deduction limit

EY, in a note released ahead of the Union Budget, said the standard deduction should be raised to ₹1 lakh.

Notably, standard deduction is an amount that is subtracted from the taxable income.

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.

All wings of the government are in favour of offering relief to the middle class, and an increase in standard deduction is being seen as one of the measures, the newspaper reported.

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