Budget 2021: An Increase in Standard Deduction Limit May Bring Relief to WFH Employees | Here’s What it Means

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.

Budget 2021: With work-from-home (WFH) becoming the ‘new normal’ till the coronavirus pandemic lasts, the Union Budget this year is expected to draw extra focus on salaried employees as the Finance Ministry may increase the standard deduction limit. Experts said that a hike in the standard deduction may be a good idea for the pandemic-hit economy.

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.

What is standard deduction?

Introduced in 2018 by former Finance Minister Arun Jaitley, standard deduction is a fixed deduction taken from an individual’s salaried taxable income that allows the government to put more money in the taxpayer’s hands. The standard deduction replaced the medical and travel allowances of an individual as allowed under the Income Tax Act.

At that time, a salaried individual or a pensioner could claim up to Rs 40,000. This was increased to Rs 50,000 in the next Budget session by Finance Minister Nirmala Sitharaman. That was Sitharaman’s maiden Budget session.

Experts have said that the government should further increase the amount to 1 lakh in Budget 2021 in view of the rising inflation, Federation of Indian Chambers of Commerce & Industry (FICCI) was quoted in a LiveMint report.

With most of the world working remotely to prevent the spread of COVID-19, individuals have incurred higher electricity costs, set up costs and other work-related expenditures at home. As a result, the government should consider the employee’s situation and increase the standard deduction limit, the industry body said in the report.

“This will boost spending or ability to invest,” Kunal Varma, chief business office and co-founder, MoneyTap told LiveMint.

Hopes are high and all eyes are glued at the Finance Minister Sitharaman’s announcement on February 1 as she unveils Budget 2021-22.