As the eagerly awaited Interim Budget 2024 draws near, the middle-class is hopeful for financial relief through potential income tax concessions. A primary expectation on the horizon is an increase in the standard deduction limit from the current ₹50,000 to ₹1 lakh.
With the ‘Vote-on-Account’ nature of the upcoming Budget, the question arises: Is there room for adjustment this time? Despite the limitations, experts, including Sandeep Sehgal, Partner-Tax of consulting firm AKM Global, suggests that an increase in the standard deduction might be possible, citing a similar adjustment in the interim Budget of 2019.
A vote on account, as defined by Article 116 of the Indian Constitution, provides an advance grant to cover short-term expenditure until the new financial year begins. CA Ruchika Bhagat, MD of Neeraj Bhagat & Co, notes that the vote-on-account structure could restrict alterations to the standard deduction, with significant changes possibly considered only in the full Budget after the general elections.
The escalating living costs, marked by a retail inflation of 5.69% as of December 2023, demand a periodic revision of the standard deduction to account for inflation. Anand Rathi Advisors emphasize the need for adjustments to align with the changing economic landscape, proposing a consideration of the standard deduction as a percentage of total income from salary.
Atul Thakkar, Director of Investment Banking at Anand Rathi Advisors, highlights the impact of the COVID-19 pandemic, making remote work a permanent fixture and necessitating a higher standard deduction to offset increased home office expenses. The standard deduction has remained largely unchanged from FY04-05 to FY22-23, prompting experts to advocate for revisions to better meet the evolving needs of salaried individuals. As the Interim Budget unfolds, the middle-class awaits potential changes that could positively impact their financial landscape.
