As a salaried employee, it is important to be aware of the various tax deductions and exemptions that can help lower your tax liability. One such provision that can help you save on taxes is the standard deduction under Section 16 of the Income Tax Act. This section allows salaried employees to claim a deduction on their salary income to cover certain expenses incurred during the course of their employment. In this blog post, we will explore the standard deduction provision and the suggestions for enhancing it to better serve the needs of salaried employees in India.
What is Standard Deduction?
Salaried employees are currently allowed standard deduction under Section 16 @ Rs 50,000 or 1/3 of the salary whichever is less. This is to cover many expenses incurred during the course of the employment other than professional tax on employment. There are various expenses that the employees incur during the course of employment which they cannot claim as deduction. This deduction is irrespective of the amount of expenses incurred by the Salaried person.
Suggestions for Enhancing Standard Deduction:
At the same time, the few exemptions that are available to them under Section 10 are subject to upper limits which have been fixed several years back and virtually serve no purpose on account of inflation. It is suggested that the standard deduction under Section 16 may be enhanced to at least Rs. 100,000 to ease the tax burden of the employees and keeping in mind the rate of inflation and purchasing power of the salaried individual. Additionally, it may be linked to the cost inflation index for regular enhancement in deduction amount similar to the available for income under the head capital gains.
The standard deduction provision under Section 16 provides a valuable tax saving opportunity for salaried employees. However, the current limits may not fully address the needs of employees in light of inflation and other expenses incurred during the course of employment. By considering the suggestions for enhancing the standard deduction and linking it to the cost inflation index, the government can better serve the needs of salaried employees and ease their tax burden.