ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Abolition of Standard Deduction

The fringe benefits tax and the tax on cash withdrawals has attracted controversy, but it is the abolition of the category of 'Standard Deduction' in income tax law which is a faux pas. The finance minister is wrong to declare standard deduction, which is a mandatory deduction to arrive at the 'net taxable income' of the salaried class, as some kind of a 'personal allowance' which should be done away with. It is neither a 'personal allowance' nor an 'exemption'. And if it is a mandatory mechanism for computing the 'net taxable income' of the salaried class, can this be ever abolished as a category? It is indeed ironical that while P Chidambaram wants to dispense with standard deduction, treating it as a 'personal allowance', he has no problem in perpetuating exemptions for several allowances such as on transport, uniforms and for encouraging academic research and other professional pursuits.

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