At present, Rs 50,000 standard deduction is allowed to these categories of taxpayers. Industry bodies have suggested increasing it.
“There are many suggestions on personal taxation. This year one common demand was to enhance the limit of standard deduction, especially considering inflated cost of medical expenses on account of Covid-19,” a senior official from the finance ministry told ET. “The proposal is to increase it by 30-35%.”
The proposal is subject to final approval, depending on the latest tax collection situation, the person said.
There is no standard deduction available for taxpayers who opt for the new tax regime.
A standard deduction of Rs 40,000 was introduced in 2018 by the then finance minister, the late Arun Jaitley and was later enhanced to Rs 50,000 by Piyush Goyal in the interim budget in 2019.
With the Covid-19 pandemic increasing at-home expenses of salaried class such as electricity and communication, there have been demands for some relief to taxpayers.
“The government should make it a regular practice to revisit the limit of standard deduction every year,” said Sudhakar Sethuraman, partner at Big Four accounting firm Deloitte. “I do not have a ready number but I feel it should be enhanced by at least 20-25% for two reasons – one, to match the periodic inflation, and second, because of increased expenses due to work-from-home situation in the current pandemic.”
He said many countries have introduced tax exemptions on Covid-induced work from home expenditure, including office setting up, and expenditure on medical benefits related to the pandemic.
In their pre-budget meetings, trade bodies including Assocham and Confederation of Indian Industries (CII) have sought higher standard deduction.
“Going by the current situation, the standard deduction is too low and should be at least Rs 75,000,” said Ashok Shah, partner at professional services firm NA Shah Associates. “Also, it needs to be revised and linked to inflation. Many countries are doing it.”
He said the government is already taking into account the inflation rates while calculating taxation of capital gains.
Finance ministry sources ruled out the possibility of any major change in the income tax slabs.