Salaried taxpayers may have something to look forward to in the Union Budget 2022 next month. According to news reports, the Centre is mulling an increase in the Rs 50,000 standard deduction limit available to salaried taxpayers and pensioners by 30-35 percent.
Industry groups have suggested the change, and officials from the finance ministry are considering it. It should be noted that those who picked the new taxation regime will not be able to take advantage of the standard deduction.
Given the rising healthcare expenses due to COVID-19, one of the most common requests in terms of personal taxation is to increase the standard deduction limit by 30-35 percent, according to an official in the finance ministry.
The official further said the final decision on the proposal will be based on the most recent tax collection figures.
According to Sudhakar Sethuraman, a partner at accounting firm Deloitte, the government should revisit the standard deduction limit on a consistent basis in order to provide relief to taxpayers.
Owing to the periodic inflation and the rising costs of working from home, Sethuraman suggests a 20-25 percent raise. Several nations have introduced tax exemptions for those who work from home. This is due to inflated expenses such as setting up a home office.
Many salaried taxpayers are witnessing increased personal costs such as electricity and internet, leading to calls for the standard deduction limit to be increased and revisited every year.
The standard deduction should at least be Rs 75,000, according to Ashok Shah of NA Shah Associates. Many countries have already done so, so it needs to be rectified and linked to inflation.
The officials at the finance ministry have, however, ruled out any changes to income tax slabs. They are of the opinion that the government has made many bold reforms in the past, but this is not the year for major reforms since the pandemic is still ongoing.