Standard deduction to be reviewed

INTERIM BUDGET & THE ECONOMY/INCOME-TAX

Finance Minister Jaswant Singh said the issue of revising standard deduction for salaried tax payers needed to be revisited.

"It is the conviction of the government that for the salaried class, which doubtless has the best track record of tax compliance, the issue of revising the standard deduction for Income Tax purposes has now to be revisited," Singh said in his interim Budget speech.

Singh's statement comes in the wake of pressure from the salaried class for increasing the amount of standard deduction allowed to them and from the Bharatiya Janata Party's cadres for providing tax relief to salaried tax payers in the run-up to the Lok Sabha polls.

Under the provisions of Section 16 of the Income Tax Act, deduction of a specific amount is available to an assessee having income from salary.

In his last Budget, Singh had rationalised brackets and increased the deduction allowed under the Section for assessees having salary up to Rs 5 lakh at 40 per cent of the salary or Rs 30,000, whichever was the lesser of the two.

Also assesses whose income from salary before allowing a deduction under Clause (I) of Section 16 of the Act exceeded Rs 5 lakh were allowed a deduction of Rs 20,000.

Prior to this, the amount of deduction in case of salaried tax payers having an annual salary income of upto Rs 1.5 lakh stood at 33.3 per cent of the salary or Rs 30,000, whichever was lower.

In case of assesses whose income from salary exceeded Rs 1.5 lakh but was less than Rs 3 lakh, the standard deduction allowed was Rs 25,000.

In case of assesses whose salary was between Rs 3 lakh and Rs 5 lakh, the standard deduction allowed was Rs 20,000 while no deduction was allowed for assesses whose income from salary exceeded Rs 5 lakhs.