union budget 2023 the incometax act 1961 not only provides for levy of tax on income but it also provides various methods for claiming deductions and rebates generally deductions are allowed based on how taxpayers spend their money the standard deduction is one such deduction available to salaried individualsthe standard deduction aims to achieve parity between taxpayers who receive salary income and those who receive income from their business or profession people who make a living through their profession or business are entitled to claim a deduction for a variety of expenses incurred to earn such income from business or profession however salaried taxpayers are not eligible to claim such a deduction for expensesthe standard deduction is a flat deduction available for salaried individuals without requiring proof of any expense actually incurred historically the standard deduction had been available for salaried individuals for many years the same was however removed in the year 2005 and then reintroduced in the 2018 union budgetbudget 2018 reinstated the standard deduction for an amount of rs 40000 applicable for financial year 201819 by withdrawing tax benefits available for transport allowance of rs 19200 and reimbursement of medical expenses of rs 15000 which broadly resulted in net increase in deduction of rs 5800 the goal of reintroducing the standard deduction was to reduce paperwork and compliance burdens for employers while also providing tax relief to salaried individuals in the following financial year the standard deducted limit was raised to rs 50000let us understand this with a small example the above table shows a comparison of the taxable salary for different financial years on an assumed annual salary of rs 1000000 after considering the applicable limits of standard deduction exemption for transport allowance and reimbursement of medical expenses the reduction in taxable income between financial year 201718 and financial year 201920 is only rs 15800 rs 965800 minus rs 950000 the resulting tax savings are insignificant failing to even keep pace with inflation over time in addition there has been no change in the standard deduction limit in the last four financial yearsstandard deduction issuesit is the need of the hour to increase the standard deduction limit available to salaried individuals due to the following reasonssignificant rise in inflation rate given the high inflation and the increased living expenses of salaried individuals over the past few years the standard deduction of rs 50000 is very low as a result periodic revisions to the standard deduction are essential to account for the rising cost of living expenses incurred by the salaried classincreased cost of working from home due to the covid19 pandemic due to the covid19 pandemic a significant portion of the salaried class has switched to the work from home wfh system this has led to increasing costs for such salaried personnel including higher food and infrastructural costs as well as higher utility rates furniture internet printer scanner etc although some expenses such as travelling and formal attire have decreased the overall cost has gone up