Budget 2024: Standard deduction is a big relief for salaried taxpayers. Currently salaried taxpayers can avail standard deduction of Rs 50,000 on their income. This relief is available under both the old and new income tax regime. However, experts believe that the existing limit of Rs 50,000 for the standard deduction needs to be revised.
Finance Minister Nirmala Sitharaman is expected to present the Interim Budget 2024 on February 1, 2024. Tax experts believe there is a case for increasing the standard deduction, or even linking it to inflation or a person’s income level. Tax experts say India can also take a lesson from the standard deduction rules adopted by other major countries.

Budget 2024: Why should the standard deduction be increased?

Surbhi Marwah, tax partner at EY India, believes the standard deduction should be increased to Rs 1,00,000 from the current limit of Rs 50,000. “The standard deduction was introduced at Rs 40,000 in 2018 and then increased to Rs 50,000 in Budget 2019. The inflation index has increased from 4% in September 2019 to 5.55% in November 2023,” explains Surabhi. “Therefore, considering the increase in cost of living and the fact that salaried taxpayers cannot claim deductions for expenses, the standard deduction should be increased,” she tells TOI.
Chander Talreja, partner, Vialto Partners, is of the view that the government should consider linking the standard deduction to the salary income level of the individual where they get a fixed percentage (5% to 7%) as deduction which is in line with the basic salaried. Expenses of individuals.
“However, considering the revenue budget constraints, the standard deduction may be increased by at least Rs 15,000 (currently Rs 50,000). The increase in standard deduction will bring happiness to individuals as it is also available under the new personal tax regime,” he told TOI.
According to Kuldeep Kumar, partner, Mainstay Tax Advisors, the standard deduction in India deserves an increase in two cases. “One is the adjustment to the inflation factor since then, and the other is the change in the working model,” he says.

Post COVID-19, many employers have introduced permanent work-from-home models for at least a few days of the week. There is no separate deduction available under Indian tax laws for additional expenses incurred by employees for working from home. “Some countries, like Germany, allow a standard deduction of 6 Euros (up to 1260 Euros) per calendar day when working from home,” he told TOI.

How does the standard deduction in India compare to countries globally?

Chandar Talreja of Vialto Partners lists the standard deduction limits and rules in some major countries around the world.

Chander Talreja says that to make a complete comparison with India, one has to keep in mind some important points applicable to each of the above countries such as income levels, concept of filing joint tax returns, deductions for various specified expenses etc.
Kuldeep Kumar explains that many countries like USA, UK, Germany, France etc. allow deduction from employment income. “These are either for certain expenses such as cost of commuting to work, business literature, work equipment, professional dues, education expenses, etc., or there is a standard deduction based on a percentage of taxable income or up to some specified limit. Limitations,” he says.
Nitin Baijal, executive director, Deloitte India, suggests that as a future measure, a standard deduction as per the slab or as a percentage of salary may be provided to cover subsistence expenses like in EU countries.

“This will not only reduce paperwork, but will also aim to reduce tax outflow, thereby increasing the take home of the salaried class. The quantum of deduction based on the cost of living index may also be revisited every year to meet the growing needs of employee taxpayers,” he told TOI.

Answers to frequently asked questions about the standard deduction:

What is the standard deduction for FY 2023-24?
For both the old and the revised new income tax regime, the standard deduction for salaried taxpayers is Rs 50,000.
Is standard deduction allowed in the new tax regime?
Yes. Effective financial year 2023-24, i.e. assessment year 2024-25, standard deduction has been allowed under the new income tax regime. This change was announced by Finance Minister Nirmala Sitharaman in last year’s budget.
Is there any change in standard deduction?
A standard deduction of Rs 40,000 in lieu of medical and transport reimbursement was introduced in the year 2018. This limit was increased to Rs 50,000 in the 2019 interim budget.