Budget 2021 income tax: What is standard deduction and why salaried class wants it to be increased more than ever before

Budget 2021 income tax: A portion of the gross salary of a salaried person is deducted as Standard deduction and later claimed as an exemption.

This was first introduced by the then Finance Minister Arun Jaitley in Budget 2018. He has then done away with the transport allowance of Rs 19200 and medical reimbursement of Rs 15,000 per annum and replaced it with standard deduction of Rs 40,000. 

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This amount is claimed by the taxpayers as exemption. With the Budget 2021 coming during the Covid 19 era and work from home gaining momentum, salaried class is expecting some hike in the amount fixed as standard deduction.

Experts believe that hike in standard deduction will be a good sign for the pandemic-hit economy as it will put more money in the hands of taxpayers and hence increase the spendings. 

This standard deduction was increased to Rs 50,000 Finance Minister Nirmala Sitharaman in her maiden budget.  Experts as reported by the media suggest that to keep pace with the ever-rising medical cost (amplified due to Pandemic) and the fuel cost, the standard deduction is likely to be increased from existing Rs 50,000 to Rs 100,000 per annum in the Budget 2021.  

This could be a big boost, especially for the salaried individual and professional, who had to make high-cost personal expenditures to set up an office at home, as opposed to commuting cost.