Standard Deductions for Income Tax may be back
Ahead of the annual budget, here’s some cheer for salaried employees and pensioners. The finance ministry is considering bringing back standard deduction of up to Rs 20,000 in individual taxable incomes.
According to revenue department officials, the government may be willing to take a small hit in return for a spike in spending that it hopes will result from a bigger disposable income with the salaried classes.
Till the budget for 2005-06, a standard deduction of Rs 30,000 or 40 per cent of income, whichever was lower, was allowed to salaried employees with an annual income between Rs 75,000 and Rs 5 lakh. For those earning more, the standard deduction was fixed at Rs 20,000.
The standard deduction was meant to compensate salaried people for the fact that self-employed small businesspersons or entrepreneurs paid tax only on their net income after deducting business expenditure.
Source : Indian Express