The Case for Higher Standard Deduction from the Union Budget 2021


January 27, 2021: In July 2019, the finance minister Nirmala Sitharaman had presented her union budget, which was the first Budget of the Second term of the NDA. She had raised the standard deduction of paid employees from to 50,000 from 40,000. 

Union Budget

What is this standard deduction and why is it important? This deduction is a fixed amount that is deducted from an individual’s taxable income. 

It can be done by the government in order to hand more money to the taxpayer, especially after the Covid-related lockdowns, and a significant increase in this standard deduction is required. 

Follow These Simple Steps to Check Your Income Tax Refund Status

The Budget that was presented in February 2020 managed to eliminate the standard deduction for all taxpayers who chose to enter a new tax regime. These tax slabs were 5-10% lower than the former tabs and at the lower end of the income sale. The tax rate remains the same for the higher end, which is considered at Rs.15 lakh and above. 

In an earlier article written in July 2019, it was discussed how the deduction schemes and income tax rules are skewed against salaried employees. The tax is always deducted by the employers, therefore curbing the salary taken home by the employees. 

The finance ministry had disagreed with the content of the July article and had issued a written response soon after.

“The tax paid on taxable salary income and on gross amount of professional receipts cannot be compared as the taxable income in case of professionals is computed after allowing all expenses incurred for carrying out the profession. These expenses include rent for office space, salaries, electricity expenses for the office, printing and stationery etc. 

However, in respect of a salaried individual, there is no requirement to maintain any office and the office expenses are borne by the employer. The only major expenses required to be incurred by a salaried individual for earning salary income is the expense incurred for commuting to the office. For this purpose and other miscellaneous petty expenses which a salaried individual might have to incur, a standard deduction is allowed to the salaried taxpayer which is currently Rs.50,000.”

Union Budget 2020-21 Of India

The article was not written to highlight the legitimate expenses allowed to employees, rather to discuss the few selective options offered to claim equal legitimate expenses. This situation is highlighted again in the recent times where everyone was employed at work from home, but employees were not even allowed to claim any money on the money spent in setting everything up at home. 

The deductions that have been allowed are unrealistic and way-less significant than the original cost of these services. 

Then comes the presumptive tax scheme; under this, professionals are allowed to file a return of 50% of their gross returns. This tax does help smaller and medium-sized professionals but it has also created a disparity between professionals and consultants. 

The former Finance Minister, Arun Jaitley, saw this in a different light and had pointed out the fact that a salaried employee tends to pay thrice the tax amount than a non-salaried taxpayer. 

Is this year’s Union Budget bound to consider the fact that most employees were settled at home and had to bear expenses of the infrastructure on their own? The finance ministry’s step regarding this matter is the most awaited as this current situation is likely to prevail for a long time. 

AEC Introduces Digital Voter ID Cards: Get to Know All About This

Prepared for Your Next Journey? Discover the Importance of Travel Insurance

Travelling is one of life's many pleasures, offering you the chance to explore new cultures and experiences. It broadens horizons, fosters personal growth, and...

Top 10 Tips for Budding Investors

Beginning the adventure of investing may be both exhilarating and intimidating for new investors. Understanding the fundamental concepts of investing is your compass in...

10 Best Cryptocurrencies To Invest In October 2023

Cryptocurrency enthusiasts and investors are always on the lookout for the next big opportunity. In October 2023, the crypto landscape is poised for potential...

Related articles

Welcome to the Jungle (Welcome 3) Budget and Box Office Collection Prediction

To celebrate Akshay Kumar's birthday, a new promotional video for "Welcome to the Jungle," the third installment in...

Buddy Budget and Box Office Collection Prediction

Buddy is an upcoming Telugu language movie starring Allu Sirish in the lead role. It is an official...

Salaar Budget and Box Office Collection Prediction

Salaar is an upcoming Kannada movie which will be directed by the KGF fame Prashanth Neel and produced...

Rocky Aur Rani Ki Prem Kahani Budget and Box Office Collection Prediction

Rocky Aur Rani Ki Prem Ki Kahani is an upcoming romantic comedy movie which is slated to release...

Salaar Budget: Prabhas Starrer Among the Most Expensive Indian Films Ever

Salaar: Part 1 – Ceasefire, an anticipated Indian Telugu-language epic action thriller, is directed by Prashanth Neel and...

Argylle Movie Budget, Cast, Plot

Argylle, a forthcoming spy action comedy directed and produced by Matthew Vaughn with a screenplay by Jason Fuchs,...

Lift Netflix Movie Budget, Cast and Plot

Lift, an upcoming heist comedy directed by F. Gary Gray and penned by Daniel Kunka, features a star-studded...

Godzilla x Kong: The New Empire Budget and Box Office Collection Prediction

Adam Wingard's Godzilla x Kong: The New Empire is a forthcoming American monster film. It is a sequel...