Finance Ministry Considers Higher Standard Deduction Limit in New Tax Regime

The Finance Ministry is currently evaluating the feasibility of increasing the standard deduction limit for taxpayers under the new tax regime, while maintaining the exemption-heavy older regime unchanged. Additionally, as the NDA government prepares to unveil its inaugural Budget of its third term, it appears reluctant to make significant alterations to the capital gains framework, an area where the income tax department has been advocating for a reassessment.

As Finance Minister Nirmala Sitharaman initiates public consultations on the Budget's framework, discussions are in their early stages. The Finance Ministry is primarily conducting internal assessments on various matters, intending to engage with other government departments before reaching final decisions. Feedback from the PMO will also influence the ultimate choices made by the finance ministry.

According to a report of TOI, The overall mood indicates that most wings of govt are in favour of offering concessions to taxpayers, especially the middle class, which has been a supporter of the Modi regime but is increasingly raising questions about the returns it gets for the tax it pays, be it through public healthcare or education.

In the 2023 Budget, the Finance Minister introduced a standard deduction of Rs 50,000 for salaried taxpayers and pension earners under the new tax regime, which became mandatory unless voluntarily opted out. Additionally, the rebate under Section 87A was enhanced for taxable incomes not exceeding Rs 7 lakh, ensuring no tax liability for those within this bracket under the new regime. Furthermore, the highest surcharge under the new regime was eliminated.