Salaried individuals and pensioners who were expecting a hike in standard deduction had to face disappointment on February 1, as Finance Minister Nirmala Sitharaman left tax rates, slabs and deductions unchanged.
At present, standard deduction under both the regimes is Rs 50,000. All salaried individuals, irrespective of the tax bracket they fall into, enjoy this tax benefit.
Last year, FM Sitharaman had extended the standard deduction to the new tax regime as well, bringing it on par with the old tax regime. Tax experts have been calling for an increase in standard deduction to account for rising inflation that has pushed up individuals’ cost of living.
Typically, no major tax measures are announced in a vote-on-account. Despite this, however, individuals and tax experts were expecting some tax sops to be announced in the backdrop of upcoming elections.
More importantly, in the February 2019 Budget, the then interim finance minister Piyush Goyal had announced several tax concessions such as tax rebate for those with incomes of up to Rs 5 lakh and increase in standard deduction from Rs 40,000 to Rs 50,000.
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It is a flat deduction available to salaried tax-payers and pensioners. Tax-payers do not have to submit any supporting documents as proofs to claim this tax break.
Standard deduction was re-introduced in the Budget 2018 to replace the tax break of up to Rs 34,200 on medical and transport expenses. Tax-payers had to furnish the bills to claim these tax breaks, adding to the documentation burden involved in tax procedures.
The standard deduction emerged as a simpler alternative and the amount eligible for the tax relief was subsequently raised to Rs 50,000 in interim Budget 2019.
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