With living costs and inflation steadily climbing, the current standard deduction for salaried individuals is falling short. Stuck at ₹50,000 since 2018, this tax benefit no longer reflects the economic realities faced by the middle class. They argue for an increase in the standard deduction limit to ease the financial burden on salaried individuals.As Budget 2024-25 approaches, theres a growing buzz about a potential revision that could double the standard deduction to ₹1 lakh. This change would provide much-needed tax relief for middle-class taxpayers.What is standard deductionThe standard deduction is a simple tax benefit that reduces taxable income for salaried individuals. Unlike some other deductions, it doesnt require additional documentation or proof of investments. While there are expectations for an increase, Finance Minister Nirmala Sitharaman has indicated that significant changes might only be announced in the full Budget.What KPMG saysAccording to media sources, consulting firm KPMG has outlined some key changes they would like to see in the upcoming Budget. Doubling the standard deduction is at the top of their list, alongside increasing the tax benefit on home loan interest payments and streamlining the capital gains tax regime.KPMG emphasizes the rising cost of living, including medical expenses and fuel, as a reason to raise the standard deduction to ₹1 lakh. This adjustment would offer essential financial relief to the middle class, potentially boosting the overall economy as individuals have more disposable income to spend or save.Another prominent suggestion is to increase the basic tax exemption limit under the new tax regime, potentially raising it from ₹3 lakh to ₹5 lakh. This change would allow individuals to keep more of their earnings, stimulating economic activity.KPMG also advocates for increasing the deduction for interest on home loans for self-occupied properties, particularly under the old tax regime. Ideally, they would like to see the deduction raised to at least ₹3 lakh or offer similar benefits under the new regime. This could support the real estate sector, currently facing challenges due to rising interest rates and regulations.Finally, the firm calls for a simplification of the capital gains tax structure. Currently, the system is complex, with varying rates for different types of assets. Implementing a more uniform structure with consistent holding period requirements and tax rates would align with the governments goal of streamlining the tax code.As the middle class eagerly awaits Budget 2024-25, theres hope for a more responsive tax system with an inflation-adjusted standard deduction.
