Budget Expectations: Necessary to Increase Tax-Free Limit, Standard Deduction

As discussions swirl around the upcoming budget, the hopes for relief and exemptions in personal income tax seem indispensable. During the presentation of the interim budget, the Finance Minister had indicated that we must await the full budget in July for significant announcements. Experts believe that the government’s financial position is sound. Therefore, there might be some announcements to appease taxpayers.

Tax-Free Limit: The tax-free limit could be increased. Under the new tax regime (New Tax Regime or NTR), the annual exemption limit is three lakh rupees, and under the old regime (Old Tax Regime or OTR), it is two lakh fifty thousand rupees, which is not taxable. There is a strong expectation that the tax exemption limit will be increased in both regimes. This could be increased by at least fifty thousand rupees, which can provide significant relief to small taxpayers.

Standard Deduction: The government may make a big announcement for salaried people. The government can increase the standard deduction (Standard Deduction) to one lakh rupees, which is currently fifty thousand rupees per annum. The standard deduction was removed in the financial year 2005-06 and reintroduced in 2018. It was increased from forty thousand to fifty thousand rupees in the interim budget 2019. But since then, inflation has increased tremendously. Therefore, the hope of increasing the standard deduction limit is not unreasonable for ordinary taxpayers.

Interest Cut on Housing Loan: The government wants to make the new tax system more attractive. Several announcements were made in the previous budget to adopt the new system more and more taxpayers. In the new system, taxpayers do not receive any kind of exemption on the payment of interest and principal on housing loans.