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

Standard deduction drafting oversight risks reversion to a lower allowance unless corrigendum, ordinance, or statutory amendment is adopted.
A drafting lapse confines the enhanced standard deduction to the transitional tax-clause, omitting the succeeding clause and thereby reverting the deduction to the lower amount for the subsequent assessment year unless corrected. Administrative correction via corrigendum, executive amendment by ordinance, or statutory amendment in the next Finance Act are proposed remedies to align the provision with apparent legislative intent.