Budget 2022: Standard income tax deduction may rise by 30-35 percent
New Delhi, Jan 11: Amid a global pandemic, the central government may hike the standard deduction limit available to salaried taxpayers and pensioners by 30-35% in the upcoming budget. However, income tax slabs are likely to remain unchanged given the limited fiscal headroom.
"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 The Economic Times.
The government's move is seen as a relief to salaried employees and pensioners due to rising expenses because of the Covid-19 pandemic.
The standard deduction limit will not be applicable to eligible taxpayers who opt for the new income tax structure.
It may be recalled that a standard deduction of Rs 40,000 was introduced in 2018 and it was later enhanced to Rs 50,000 in the interim budget for 2019.
The demand for a higher standard deduction holds significance as household, electricity, medical expenses expenses have gone up as a result of inflation amid the global pandemic.
Deloitte India, in its pre-budget expectations, has called for a reduction in the highest tax rate of 30% to 25%, and also an increase in the threshold limit for the highest tax rate from the current Rs 10 lakh to Rs 20 lakh.
"An individual is required to pay taxes based on the slab rates. The highest slab rate (after including surcharge and cess) for income exceeding Rs 5 crore in India is currently at 42.744%," Deloitte India was quoted by Fortune India.
"There has been a reduction in corporate tax rates over the past few years. Hence, to align individual tax rates with the corporate tax rate, it is advisable to reduce the highest tax rate of 30% to 25% and also increase the threshold limit for the highest tax rate from Rs 10 lakh to Rs 20 lakh. Therefore, the proposed highest slab rate (including surcharge and cess) can be reduced to 35.62% from 42.744%," it adds.