JULY 29, 2024

By B B Singh, Ex. IRS

THE salaried middle class had always been at dis-advantage vis-a-vis other categories of tax payers since the inception of Income Tax Act 1961. Several governments had come and gone but no one had addressed the plight of salaried class (which includes pensioner too). In early times, when the income from salary was meagre say below a lac of rupees annually, the standard deduction, which was in the nature of giving flat deduction in lieu of household and personal expenditure to arrive at real income was fixed at 1/3rd of the salary or Rs. 15000/- whichever, was less. This Rs. 15000/-, 50 years ago meant a lot. The word 1/3rd had conveyed the presumptive estimate of expenses. However, the deduction of 1/3rd of salary was given go bye and an artificial fixed amount of Rs. 50000/-was assigned as deduction. If we see the other heads of income tax i.e. business, capital gains, house property and other sources the actual expenditure is deducted for arriving the real income contrary to the case with salary. For certain categories of business, the profit estimated at 8% upto a certain limit of turnover. In property income flat 30% of property income is deducted for expenses without enlisting the details. Your salary may be in crore but deduction is fixed at Rs. 50000/- irrespective of the fact that number of family members and dearness increased with passage of time. Today irony is the employer company is taxed at lower rate than the individual employee.

The salaried class is not able to save money and the result can be seen from the depleted deposits in the Bank as reported recently in the news paper.

In the 2024 budget - Standard deduction is increased marginally to Rs. 75000/- that too only in new tax regime. With increase in dearness and inflation in recent times, it should have been compensated more by increased standard deduction as percentage of income and upward revision of slab too.

Whatever, left after paying income tax the salaried employee had to bear GST on various products bought for living i.e. food, clothing, fuel etc. Additionally one has to pay property tax, water and electricity tax which aggregates more than 15% of the earning along with 30% plus of income tax i.e. roughly more than 45% gone in tax.

The equitable approach to this class of taxpayer needs immediate attention and the concept of real income i.e. income minus actual reasonable expenses to arrive at the taxable income be considered sympathetically.

[The views expressed are strictly personal.]