In the next Union Budget 2022-23, salaried taxpayers may have something to look forward to. According to sources, the government may hike the Rs 50,000 standard deduction ceiling for salaried taxpayers and pensioners by 30-35 per cent.
Industry groups have proposed the modification, and authorities from the finance ministry are considering it. It should be highlighted that those who choose the new taxation regime will not be able to take advantage of the standard deduction.
Given rising healthcare-related expenses owing to Covid-19, one of the most prevalent demands in terms of personal taxation is to increase the standard deduction limit by 30-35 per cent, according to a finance ministry official. The final decision on the proposal is yet to be taken and will depend on the latest tax collection data.
The standard deduction limit of Rs 40,000 was introduced by then finance minister Arun Jaitely in 2018 and later increased by Piyush Goyal to Rs 50,000 in the interim budget in 2019.
Although officials from the finance ministry have ruled out any changes to income tax slabs, the government has previously implemented a number of daring measures, but this year will not be one of them because we are still in the midst of a pandemic.
Those with a salary income are eligible for a deduction of a lumpsum amount from the gross salary, under the standard deduction provision, which was implemented in Budget 2018 by withdrawing tax benefits on medical and transportation allowances that were previously available. The deduction was Rs. 40000/- which n the following budget, was raised to Rs. 50,000.
Extending the benefit of the standard deduction to pensioners, the IT Act allows those receiving pension too, to claim this deduction. Note that the pension here does not include family pension, which is given to dependent family members, after the death of the employee; family pension is chargeable to tax under the head ‘income from other sources.’