The income tax-payers comprising Middle Class in India may have their old demand met on February 1st when the Finance Minister Nirmala Sitharaman presents the Union Budget 2021-22.
Budget 2021 is almost upon us and every taxpayer is looking for income tax exemption and standard deduction relief from government in order to save some money. The income tax-payers comprising Middle Class in India may have their old demand met on February 1st when the Finance Minister Nirmala Sitharaman presents the Union Budget 2021-22. Chances are high that the Narendra Modi Government may announce a hike in the basic income tax exemption limit in the budget 2021. Sources close to IANS have reported that the Budget 2021 may take the sops announced earlier under the Atmanirbhar Bharat package by raising the basic tax exemption limit (Income Tax Slab 2021-22 for zero tax) for an individual income tax payee to Rs 5 lakh from existing Rs 2.50 lakh and increase their net disposable income.
Income Tax Standard Deduction to go up to Rs 1 lakh: Chances are high that FM Nirmala Sitharaman may announce an increase in income tax Standard Deduction limit from existing Rs 50,000 to Rs 1 lakh, which will be a big relief to the taxpayers as medical reimbursement and travel allowance exemption were done away from FY 2018-19 in lieu of the standard deduction. Higher levels of standard deduction will help individuals to keep with the ever-rising medical cost that has got amplified due to the pandemic and the rising fuel costs.
IANS has reported that while the level of deduction has not been worked out, if accepted, it may go up to Rs 75,000-Rs 1,00,000 based on various pre-budget recommendations given to the Finance Ministry. Standard deductions ensure that all taxpayers have at least some income that is not subject to income tax. These generally increase each year due to inflation.
While the proposal to raise the basic tax exemption limit for individuals has come from different quarters, sources said that the Department of Revenue will take a call on it after examining the tax implications.
Speaking on the relief coming in for the Indian middle class in the upcoming budget; Parizad Sirwalla, Partner and Head — Global Mobility Services-Tax at KPMG Assurance and Consulting LLP India said, “This would also need to be assessed on basis of the potential number of taxpayers (estimated at 3.5 crore) who may fall out of mandatory tax return filing requirement. Subsequently, the other slab rates — both under the existing and new regime — can be adjusted on basis of the revised limits in line with the progressive tax rate system India has always adopted.”
In the 2019 interim budget, the Narendra Modi government had proposed a rebate on all payable taxes if an individual’s taxable income is up to Rs 5 lakh per annum. But it kept the basic exemption levels unchanged. Even in budget 2020, the basic exemption limit remained unchanged even though the government provided some relief to taxpayers by allowing them to choose between the existing tax regime and an (optional) alternative new tax regime with lower rates sans exemptions.