#Budget2021: Basic Tax Exemption Can Be Raised To Rs 5 Lakh; Standard Deduction Can Be Raised As Well
The Financial Minister of India, Nirmala Sitharaman has said that the basic tax exemption might be raised up to Rs. 5 lakhs under the budget for the new year, 2021.
Read on to find out what else will be modified in the new budget!
Financial Minister States Basic Exemption Might Be Increased To Rs. 5 Lakh
As per sources, the Budget 2020-21 will be taking the SOPs that were announced earlier. These SOPs were announced under the Atmanirbhar Bharat package so as to help them deal with the COVID-19 pandemic.
This includes the extension of the basic tax exemption limit for an individual income tax payee to Rs 5 lakh. This limit was previously set to Rs. 2.50 lakh to enhance the net disposable income they receive.
The government had proposed in the interim budget of 2019 a rebate on all payable taxes if in case the individual’s taxable income is under Rs. 5 lakh per annum. However, the basic exemption levels remained unchanged.
The basic exemption limit remained unchanged even though the government has provided some relief to tax payers. This relief allowed people to choose between the existing tax regime and another alternative optional tax regime with lower rates without any exemptions.
As per sources, the proposal to increase the exemption limit for individuals has come from different quarters. However, the final decision will be announced by the Department of Revenue after the examination of tax implications.
Standard Deduction To Be Raised Also?
There also is news of an increase in the level of the standard deduction, which is fixed at Rs. 50,000 as of now. This is also expected to provide a relief to tax payers as medical reimbursement and travel allowance exemption were removed from FY 2018-19 instead of the standard deduction.
If the standard deduction level is higher, it will help people to maintain the medical cost and fuel costs that have been increased due to the pandemic.
As per sources, the level of deduction hasnt been worked out yet, and if accepted, the level may be increased up to Rs. 75000 to Rs. 100000. This will be based on the various pre-budget recommendations that have been made to the Finance Ministry.