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Standard-deduction-in-India

Standard deduction in India

A brief explanation of the standard deduction in India

What is the Standard Deduction under the Income Tax Act?

The standard Deduction is a fixed deduction of Rs. 50,000 from your taxable income in the “salary” category. You can get this tax benefit without worrying about how much you spent on Transportation or Medical allowances.

Standard Deduction on Salary

It’s essential to know how the tax benefits from the Standard Deduction have changed over the years since it started.

Particulars

Before Standard Deduction

For FY 2018-19

For FY 2019-20

From FY 2020-21

Specific Condition for exemption

Should be provided by the employer

No Requirement/condition

No Requirement/condition

Assessee should not opt for the New Tax Regime u/s 115BAC

Transport Allowance Exp

19200

0

0

0

Medical Allowance Exp.

15000

0

0

0

Standard Deduction in place of the above allowances

0

40000

50000

50000

Deductions available

34200

40000

50000

50000

Standard Deduction for Senior Citizens

In India, if you’re between 60 and 80, you’re considered a senior citizen by the law. Pensions are money given to people, especially senior citizens, because of their past work.

In the Indian tax system, when senior citizens get pensions from their old employers, it’s considered part of their salary, and they must pay taxes.

However, a rule called Section 16 in the IT Act says pensioners can deduct up to Rs. 50,000 from their income for tax purposes or the amount of their pension, whichever is less. This rule helps ease the financial burden on senior citizens.

Standard Deduction under the New Tax Regime

Here is the standard Deduction provided in the New Regime:

Particulars

FY 2022-23 (Old Tax Regime)

FY 2020-21 2022-23 (New Tax Regime)

Salary income

RS. 3.5 lakh 

Rs. 3.5 lakh 

Standard deduction 

50,000 

Salary Taxable 

Rs 3 lakh

Rs 3.5 lakh

Who Can and Cannot Claim Standard Deduction?

The standard salary deduction is something that people who earn a salary or get a pension can use to reduce their taxes, except for business owners. But there are some situations where you can’t use this Deduction:

  1. Your spouse lists all of their deductions if you’re married and file your taxes separately from them.
  2. If you had a special tax status as a non-resident or dual status during the year.
  3. If you’re filing taxes for less than a full year.

Impact of Standard Deduction

The standard Deduction has these effects:

  1. Makes tax paperwork easier and lets you deduct money without proving how much you spent.
  2. Reduces taxes for regular people with jobs.
  3. Gives benefits to retirees receiving pensions.

This post on the Standard Deduction in India has come to an end. Please share your views and opinions with us in the comment section below.

FAQ

1. Does the standard Deduction apply to senior citizens as well?

Ans: Yes, the standard Deduction is available to all salaried individuals and pensioners, regardless of age.

2. Can I use the standard salary deduction even if I earn more than Rs 5,00,000?

Ans: You can claim the standard salary deduction regardless of your salary amount. You can benefit from it as long as you have a salary income, and the specific amount of your salary doesn’t matter in this case.

3. Which section of the Income Tax Act talks about standard deductions?

Ans: The standard Deduction is covered in Section 16(ia) of the Income Tax Act.

4. Is there a standard deduction in India for self-employed individuals?

Ans: Self-employed individuals earn money through their businesses, not salaries. Because the standard Deduction applies only to salary income, self-employed individuals cannot claim it.

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