So, what is standard cut?
Standard deduction allows salaried individuals to reduce taxable income, cut a fixed amount from their gross salary.
This eliminates the requirement of evidence of expenses and simplifies the tax filing, making it accessible to all salaried employees and even pensioners.
How does it benefit taxpayers?
For FY 2024-25, salaried taxpayers can claim:
- ₹ 50,000 under old rule.
- ₹ 75,000 under the new regime.
This flat deduction applies during the year regarding the number of employers or real expenses. For pensioners, the deduction receives a bottom of ₹ 50,000/₹ 75,000 or at a pension amount.
Development of standard cuts
1974: To simplify tax compliance, it was introduced under Section 16 of the Income Tax Act.
2005: Finance Act ended in the Finance Act, leaving taxpayers without this benefit for more than a decade.
2018: Transport allowance () 19,200) and medical reimbursement () instead of 15,000), resumed at 40,000.
2019: Increased ₹ 50,000 in Interim budgetTo benefit the salaried and pensioners equally.
2023: Extend to new tax rule at ₹ 50,000 for FY 2023-24.
2024: Under the new regime for FY 2024-25, increased to 75,000, while in the old regime at ₹ 50,000.
Why experts expect an increase?
Salary people often carry out a significant tax burden despite various expenses to earn their income.
The current border, especially in new tax regime, is seen as inadequate to combat rising costs.
“In current inflation conditions, the current, 75,000 standard cuts are very low. Salative taxpayers are hoping that the government will increase it to ₹ 1 lakh in new tax regime, ”Vivek Jalan said, Partner in Tax Connected Advisory Services LLP.
An increase in Standard cut More taxpayers may encourage to move new taxes to governance.
According to Corporate Tax, Partner and Leader (North and East) Akash Uppal in BDO India, “The government is expected to increase further New tax rule By adjusting the tax slab and increasing the standard cuts. There is also speculation about a sunset clause for the old regime, which may eventually exclude it. ,
New tax governance versus old tax rule
The purpose of the new tax regime is to simplify tax compliance by offering tax rates, but limited cuts. Currently, taxpayers earning up to ₹ 7 lakhs annually are exempted from taxes under the new regime, while in old regime compared to ₹ 5 lakhs.
Experts believe that further adjustments, such as increasing basic discount limits and standard cuts, will make the new regime more attractive.
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