Standard Deduction for the F.Y.2025-26/A.Y.2026-27

[K.lakshmipati rao]

The Finance (No. 2) Act 2024 introduced a proviso to Section 16(ia) of Income tax Act to allow an enhanced standard deduction of Rs. 75,000/-, but with a condition.

• The language of the proviso under Section 16(ia) of I.T. Act specifies that the higher deduction applies only when income is computed under clause (ii) of Section 115BAC(1A)—i.e.,for A.Y. 2025–26.
• Unfortunately, the provision fails to mention clause (iii), which governs the tax rates for A.Y. 2026–27.
• Thus, this limits the standard deduction to Rs. 50,000 for the A.Y. 2026-27 [and not Rs. 75,000/-].

In this context, a corrigendum may be issued by the Government of India, Ministry of Finance to resolve this drafting mistake, or alternatively, the President of India can promulgate an ordinance, by increasing the existing standard deduction of Rs. 50,000 to Rs. 75,000/- for the A.Y. 2026-27.

AI Summary

Drafting Error in Finance Act 2024 May Reduce Standard Tax Deduction for Salaried Professionals Under Section 16(ia) A legislative drafting oversight in the Finance (No. 2) Act 2024 potentially limits the standard tax deduction for salaried taxpayers. The proviso to Section 16(ia) of the Income Tax Act specifies an enhanced deduction of Rs. 75,000 only for A.Y. 2025-26, omitting clause (iii) for A.Y. 2026-27. This could revert the deduction to Rs. 50,000, prompting potential remedies like a government corrigendum or presidential ordinance to rectify the technical error.