July 23, 2024
Budget 2024 Hike Standard Deduction For Salaried Taxpayers Say Experts To FM Nirmala Sitharaman | Business

Budget 2024 Hike Standard Deduction For Salaried Taxpayers Say Experts To FM Nirmala Sitharaman | Business

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Budget 2024: Standard deduction serves as a big relief for salaried taxpayers. At present salaried taxpayers can avail a standard deduction of Rs 50,000 on their income. This relief is available both under the old and the new income tax regime. However, experts are of the view that the current limit of Rs 50,000 for standard deduction needs to be revised upwards.
Finance Minister Nirmala Sitharaman is expected to present the Interim Budget 2024 on February 1, 2024.Tax experts feel that there is a case for the standard deduction to be hiked, or even linked to inflation or an individual’s income level. There are also lessons that India can draw from standard deduction rules followed by other major countries, say tax experts.

Budget 2024: Why standard deduction should be hiked

Surabhi Marwah, Tax Partner at EY India believes that standard deduction should be hiked from the existing limit of Rs 50,000 to Rs 1,00,000. “Standard deduction was introduced in 2018 at Rs 40,000 and then increased to Rs 50,000 in 2019 budget. The inflation index has gone up from 4% in September 2019 to 5.55% in November 2023,” Surabhi explains. “So, given the rise in cost of living and the fact that salaried taxpayers cannot claim deduction for expenses, standard deduction should be increased,” she tells TOI.
Chander Talreja, Partner at Vialto Partners is of the view that the government should consider linking the standard deduction to the salary income levels of the individual where they get a certain percentage as deduction such (5% to 7%) which is commensurate with the basic expenses of the salaried individuals.
“However, given the revenue budget constraints, the standard deduction may be raised by at least Rs 15,000 (presently being Rs 50,000). The increase in standard deduction will bring cheer to the individuals as it is also available under the new personal tax regime,” he tells TOI.
According to Kuldip Kumar, Partner, Mainstay Tax Advisors, in India standard deduction, merits a raise on two counts. “One is the adjustment for the inflation factor since then, and another is the change in the working models,” he says.

Post-Covid 19, several employers have permanently introduced the work-from-home model for at least a few days of the week. There is no separate deduction available under Indian tax laws for the additional expenses employees have to incur to work from home. “Some countries, like Germany, allow a standard deduction of Euro 6 per calendar day working from home (up to Euro 1260),” he tells TOI.

How standard deduction in India compares to countries globally

Chander Talreja of Vialto Partners lists the standard deduction limits and rules in some major countries around the world.

Country Deductions
France 10% of the employment income. (maximum up to Rs 12 lakhs approx (equivalent EUR 13,522)
USA A deduction of Rs 11.5 lakhs approx (equivalent to USD 13,850 ) available to all taxpayers.
UK Standard Personal Allowance of Rs 13 lakhs approx (equivalent GBP 12,570) available to all taxpayers. The same reduces if your income level raises beyond specified amounts.
Japan Minimum deduction of Rs 3.3 lakhs approx (equivalent JPY 550000) and other deductions available for specified expenses.
Singapore Maximum exemption of Rs 62650/- approx (equivalent (SGD 1000) for all taxpayers below 55 yrs age. The same is SGD 6000/- (for up to 59 years) and SGD 8000/- (for 60 years and above).

Separate reliefs are also for spouse and parental support.

Chander Talreja adds that in order to draw a full comparison with India, one would need to factor a few crucial points as applicable for each of the above countries such as income levels, joint tax return filing concept, deduction for various specified expenses etc.
Kuldip Kumar points out that several countries, like the USA, UK, Germany, France, etc., allow deductions from employment income. “These are either for certain expenses like the cost of traveling to and from work, business literature, work equipment, professional dues, education expenses, etc., or there is a standard deduction based on a percentage of taxable income or up to certain prescribed limits,” he says.
Nitin Baijal, Executive Director, Deloitte India recommends that as a future measure, a standard deduction to cover the subsistence expenses as in EU countries, can be provided slab wise or as a percentage of salary.

“This would not only reduce paperwork but also aim at reducing the tax outflow thereby enhancing the take-home of the salaried class. The deduction quantum can also be revisited based on the cost of living index every year catering to the growing needs of the employee taxpayers,” he tells TOI.

Standard Deduction FAQs answered:

What is the standard deduction for FY 2023-24?
Both for the old and the revised new income tax regime, the standard deduction for salaried taxpayers is Rs 50,000.
Is standard deduction allowed in the new tax regime?
Yes. Effective financial year 2023-24, that is assessment year 2024-25, standard deduction has been allowed under the new income tax regime. This change was announced by FM Nirmala Sitharaman in last year’s Budget.
Is there any change in standard deduction?
A standard deduction of Rs 40,000 was introduced in lieu of medical and transport reimbursement in the year 2018. This limit was hiked to Rs 50,000 in the interim budget of 2019.



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