NEW DELHI: In an apparent attempt to put money into the pockets of the salaried class, finance minister Pranab Mukherjee may bring back standard deduction on income tax when he presents the Budget.

In order to provide relief to the salaried class, the government may prefer the route of restoring standard deduction rather than increasing income tax slabs, an official of the finance ministry, who did not wish to be named, told SundayET.

The provision of standard deduction, which was given to employees to compensate for the expenses incurred by them under heads such as conveyance, was discontinued by former finance minister P Chidambaram with effect from April 1, 2006.

The Budget would definitely bring relief to the salaried class though it would finally depend on the finance minister whether he would like tax slabs to be increased or restore standard deduction, both of which will help consumers, the official added.

Another official inside North Block, who is familiar with the development, also hinted about the likely move. “There would be efforts to put more cash into the pockets of consumers. It may marginally impact tax collection but will boost consumerism and thus indirectly contribute towards tax collection,” he said.

In fact, a large section of the salaried class, including the 5.5 million central government employees, supported the Congress despite BJP’s poll promise of exempting individuals with an annual income of up to Rs 3 lakh from income tax.

Accounting regulator ICAI is among the several bodies that have suggested restoration of standard deduction. Mr Chidambaram, in his Budget 2005-06, announced the abolition of standard deduction based on recommendations of the Kelkar Committee on direct taxes.

In fact, standard deduction of 40% of employee’s salary or Rs 30,000, whichever was less, was allowed for those employees whose salary was Rs 5 lakh or less. For those with salary of more than Rs 5 lakh, a deduction of Rs 20,000 was allowed.

source: Economictimes

Tags: budget 2009, budget india, fianance minister, indian budget, indian budget 2009, stocks for budget 2009

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