Will the government increase the standard deduction to Rs 1 Lakh to help wage earners?

Estimates : This year’s budget session is about to kick off and the working class in India are staring at the date in anticipation of a number of changes that will affect their personal lives. The government, according to reports, is considering an increase in the standard deduction limit, which is available to employees and pensioners from 30 to 35% in the next budget session. This decision, if implemented, will be in response to calls from various industry bodies, including FICCI, Assocham and CII. The income tax slabs, however, will remain unchanged, officials quoted in a report said.

The Finance Act 2018 introduced a lump sum deduction from wage income up to Rs 40,000 in lieu of reimbursement of medical expenses and transport allowance. In addition, the benefit of the additional deduction of Rs 5,800 is also reduced by the increase in the contribution rate from 3% to 4%. The standard deduction has been further increased to Rs 50,000 by the 2019 finance law. However, the standard deduction will not be applicable for those who choose a new tax regime.

A standard deduction is granted to employees and taxpayers by the State to cover expenses incurred in the course of employment, with the exception of the business tax on employment, which employees cannot claim deductions .

“The standard deduction for salaried employees should be restored to at least Rs. 100,000 to ease the tax burden on employees and keeping in mind the rate of inflation and the purchasing power of the employee, which depends on the salary available for disbursement. Additionally, particularly due to the growing trend of “work from home” culture during the Covid-19 pandemic period, where the employee incurs higher work-related personal expenses (such as increased electricity, air conditioning, food, etc.),” industry body FICCI said in its memo. Exemption from reimbursement of medical expenses and transportation allowance should continue in addition to the standard deduction, he said.

The government, now, is said to have considered recommendations from industry organizations, the Economic Times said in a report citing officials.

“There are many suggestions on personal taxation. A common request this year was to raise the limit on the standard deduction, especially given the inflated cost of medical expenses due to Covid-19,” a senior government official told ET.

How will the increase in the standard deduction help employed taxpayers?

“Given that inflation-related risks are likely to shape central bank monetary policy, an increase in U.S. federal bank rates will accentuate cash outflows from markets and that the statutory concession period extended to both buyers , developers and other stakeholders in the market will expire, the immediate focus will be on how to ensure that any resulting shock is cushioned by fiscal measures, thereby providing more liquidity to all stakeholders. should be carried out by extending favorable tax benefits for affordable housing, increasing tax compensation for the payment of interest on housing loans under Sections 24, 80EE and specifically increasing the standard deduction which could increase the cash available through taxpayer savings, said Ajay Sharma, managing director of Valuation Services at Collier s India.

“The lump-sum deduction from wages can be claimed by all employees, regardless of their category and their investment needs. The standard deduction from wages was abolished for a number of years and was reintroduced by the 2018 budget, which provided for a standard deduction of Rs. 40,000 from wage income. Simultaneously, the deductions for transport allowance of Rs. 19,200 and medical reimbursement of Rs. 15,000 have been withdrawn thus providing only a minor benefit,” said Aakanksha Goel, Direct Tax Partner at TR Chadha & Co LLP.

“The standard deduction has been increased to Rs. 50,000 from the financial year 2019-20. In view of inflation and the rising cost of living over the past 2 years, the government should take a step to increase the standard deduction so that middle-class earners can breathe a sigh of relief, especially when the deductions of Rs. 34,200 have already been withdrawn as a standard deduction,” she added.

Read all the latest news, breaking news and updates on coronavirus here.

Image Source

News Source

Leave a Reply

Your email address will not be published.