Union Budget 2024: With just about a month to go before the union budget, the finance ministry has started its routine meetings and consultations with various stakeholders from the industry and social sectors. Among many proposals before the finance ministry, one pertains to tax relief for salaried taxpayers, according to reports.
Finance minister Nirmala Sitharaman will present next month the union budget, her seventh and first of the Modi 3.0 government. It is expected that the government will roll out some big tax relief measures for middle-class taxpayers in the upcoming budget.
Standard deduction limit likely to be hiked in budget 2024
According to a report by The Times of India, the government is mulling increasing the standard deduction limit under the new tax regime to make it more attractive. So far, the new tax regime has not received the response the government was expecting despite the introduction of standard deduction of Rs 50,000 in budget 2023 and a high tax rebate.
In the Union Budget 2023, Sitharaman introduced major changes in the new tax regime in the form of standard deduction to encourage taxpayers to switch from the old tax regime. She also offered full tax rebate on incomes up to Rs 7 lakh, increasing tax exemption limit to Rs 3 lakh. The other major announcement in that budget was making the new regime the default option.
Also Read: Budget 2024: Modi govt to raise tax exemption limit to Rs 5 lakh under new tax regime?
What is standard deduction?
The standard deduction, which comes under the head salary, is available as a flat deduction from the total annual compensation of an employee. While calculating tax liability of a salaried employee, a fixed amount – which is currently Rs 50,000 – is deducted as standard deduction, thus lowering the taxable amount for that individual.
Tax exemption limit under new regime may go up
Various reports also suggest that the Modi government may also hike the basic exemption limit under the new tax regime to Rs 5 lakh from the existing Rs 3 lakh in a bid to boost consumption. The government’s potential move may leave more disposable income in the hands of taxpayers who will ultimately spend that money, feel experts.
Also read: Modi 3.0: 80C Deduction benefits to be extended to new tax regime in Budget 2024?
Impact on tax liability if exemption limit hiked in budget
If Finance Minister Nirmala Sitharaman decides to hike exemption limit to Rs 5 lakh from the current Rs 3 lakh, the tax liability will come down by Rs 10,400 (including a 4% Health and Education cess) for taxpayers with taxable incomes of approximately Rs 7.6 lakh to Rs 50 lakh. Taxpayers with taxable incomes in the range of Rs 50 lakh to Rs 1 crore will save Rs 11,440 (including cess and a 10% surcharge).
Those with taxable incomes between Rs 1 crore and up to Rs 2 crore can save Rs 11,960 (including cess and a 15% surcharge) in lower taxes. Individuals with earnings of above Rs 2 crore can bring their taxable income down by Rs 13,000 (including cess and a 25% surcharge).
