Budget 2024: Standard deduction for salaried individuals expected to be raised to ₹1 lakh

What is standard deduction?

The standard deduction is a tax deduction available for salaried individuals without any proof to be submitted to their employers or the Income Tax Department. Currently, a standard deduction of ₹50,000 is allowed for all when tax is being calculated on their salaries. It is available for employees of both public and private sectors irrespective of their salary amounts.

Previously, until the financial year 2022-23, this deduction was only available under the old tax regime. Now, starting from the financial year 2023-24, taxpayers can claim the deduction under the new regime as well.

The same is available for income from pension too if the pension comes under ‘Income from Salaries’ and not under ‘Income from Other Sources.’ This basically means that when an individual receives a pension after retirement, it comes under ‘Income from Salaries’ but when the individual’s family receives the pension after their demise, it comes under ‘Income from Other Sources.’

Deduction limit to be increased to 1 lakh?

The standard deduction was first introduced in 1974 under Section 16 of the Income Tax Act (1961). It was later scrapped from the financial year 2006-07.

It was then reintroduced in the year 2018 in place of two other deductions, namely travel allowance (₹19,200) and medical deduction (₹15,000), totalling ₹34,200 per annum, with a limit of ₹40,000. The limit was increased to ₹50,000 in the interim budget of 2019.

Since the reintroduction of the standard deduction was done by replacing two deductions of a combined total of ₹34,200, there has been a consistent demand to increase its limit.

Another expert, while speaking to the publication, said, there is a possibility that the government may raise the amount of standard deduction, considering the increase in inflation. Since standard deduction has remained unchanged at ₹50,000 for an extended period, individuals are anticipating an increase to ₹1,00,000, the export noted.

Some experts believe that it is important to increase the standard deduction limit for salaried individuals to ensure that they are at par with their non-salaried counterparts. According to them, individuals who earn through business or other professions are eligible for deductions under business-related expenses, whereas salaried individuals can only claim a maximum of ₹50,000 irrespective of their actual expenses.