In anticipation of Finance Minister Nirmala Sitharaman’s Interim Budget 2024 presentation on February 1, 2024, tax experts advocate for a substantial increase in the standard deduction for salaried taxpayers. They propose a hike from the current Rs 50,000 to Rs 1,00,000, citing a rise in the cost of living indexed against inflation since the deduction’s inception in 2018.
Salaried taxpayers, unable to claim deductions for their expenses, are the primary beneficiaries of this proposed increase, according to Surabhi Marwah, Tax Partner at EY India. Chander Talreja of Vialto Partners suggests linking the deduction to individual salary levels, offering a percentage deduction (between 5% to 7%) that aligns with basic expenses.
Kuldip Kumar from Mainstay Tax Advisors highlights two key reasons for the proposed hike: adjusting for inflation and adapting to changing work models post-Covid. With remote work becoming prevalent, unlike certain countries such as Germany that allow deductions for work-from-home expenses, India lacks specific provisions in this regard.
Comparing India’s standard deduction with other major countries, Chander Talreja outlines various deduction limits and rules globally. However, he emphasizes the need to consider factors such as income levels, joint tax filing, and specified expense deductions to draw a comprehensive comparison accurately.
Additionally, tax experts like Nitin Baijal from Deloitte India suggest a future measure wherein a standard deduction, akin to EU countries covering subsistence expenses, could be implemented. This adjustment aims to streamline paperwork, reduce tax burdens, and correspondingly increase take-home pay for the salaried class.
Furthermore, FAQs regarding the standard deduction confirm that it stands at Rs 50,000 for FY 2023-24, applicable to both the old and revised new income tax regimes. Under the new regime, effective from the financial year 2023-24, this deduction is permitted, following its introduction in 2018 at Rs 40,000 and subsequently increased to Rs 50,000 in the 2019 interim budget.