Income Tax Budget 2024: FM Sitharaman increases standard deduction from Rs 50,000 to Rs 75,000 under New Tax Regime, savings of Rs 17,500 on cards

Union Budget: Finance Minister Nirmala Sitharaman on Tuesday increased the standard deduction for salaried individuals and pensioners from Rs 50,000 to Rs 75,000. This move is expected to bring relief to many taxpayers.

Taxpayers were eagerly anticipating Union Budget 2024 to address their concerns by adjusting the standard deduction limit and modifying income tax slabs. They seek measures that will alleviate their financial responsibilities and create a more favourable economic environment.

"I have two announcements to make for those opting for the new tax regime. First, the standard deduction for salaried employees is proposed to be increased from ₹50,000/- to ₹75,000/-. Similarly, deduction on family pension for pensioners is proposed to be enhanced from ₹ 15,000/- to ₹ 25,000/-. This will provide relief to about four crore salaried individuals and pensioners," FM Sitharaman said during her speech. 

The standard deduction, which is available to salaried income taxpayers and pensioners, allows individuals to deduct a fixed amount from their taxable income without the need to provide proof of expenses. At the present time, this deduction stands at Rs 50,000. An adjustment to the standard deduction would prove beneficial for taxpayers, particularly in light of the escalation in inflation and the subsequent rise in living expenses. There is speculation that this deduction may see an increase to either Rs 1 lakh or Rs 75,000, providing further respite to taxpayers. Additionally, anticipation surrounds potential modifications to the income tax slab structure or rates.

The standard deduction is a flat benefit that does not require documentary proof, making it a suitable feature of the new tax regime, which aims to reduce the compliance burden on taxpayers.

This hike was widely anticipated, with tax experts recommending an increase in the standard deduction limit in response to rising inflation. To encourage taxpayers to adopt the new regime introduced in 2020, the finance minister has announced a series of measures, with this being a significant step.

Jidesh Kumar, Managing Partner, King Stubb & Kasiva, Advocates and Attorneys, said: "I appreciate the budget benefits for the working class, women, entrepreneurs and MSMEs. These measures provide crucial relief and show a strong commitment to supporting hardworking individuals."

Dipesh Jain, Partner, Economic Laws Practice, said: "While the base exemption limit of INR 3 lakhs has remained unchanged, which was expected to be increased marginally, the 5% tax slab is proposed to be expanded by INR 1L ie INR 3 lakh - 7 lakh from the existing slab of INR 3 lakh - 6 lakh. The highest tax slab of 30% continues to be status quo ie more than INR 15 lakh.  Accordingly, there would be a marginal relief of INR 17,500 for individual tax-payers opting for new regime.  This would further enhance the attractiveness of the new tax regime as compared to the old tax regime, where there are no relaxations proposed."