The standard deduction refers to the flat deduction of one’s income from the gross salary which does not attract any tax. The best part with standard deduction is that this can be claimed as an exemption without having to show any proof of expenses.
Under Section 16 of the Income Tax Act, 1961, standard deduction can be claimed by salaried people including salaried professionals and pensioners. When a taxpayer claims standard deduction while filing his or her annual tax return, it reduces the amount of taxable income without submitting any investment proofs. The government revises standard deduction almost on a regular basis factoring in the rise in inflation.
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Another key feature of this type of deduction is that no paperwork is required to claim this kind of deduction on income and this is a stark contrast to earlier deductions like travel allowance and medical allowance. One was required to submit bills, involving a significant amount of paperwork, to claim deductions like travel allowance and medical allowance.
It is also easy to apply. Instead of itemized deductions, there is a flat reduction in the taxable income, which simplifies the computation of tax immensely for individual taxpayers.
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How is standard deduction calculated:The standard deduction is deducted directly from the gross salary. The government has fixed the deduction limit at Rs 50,000 in a fiscal year, an exemption without having to show any proof of investment and expenses. This flat deduction of Rs 50,000 brings overall taxable income of an individual lower.
Standard deduction under new tax regime:Earlier the standard deduction provision was restricted to only those opting for the old tax regime, but in this year’s budget, the government has added this deduction facility under the new tax regime as well. So, it has been made universal and one can claim standard deduction of Rs 50,000 irrespective of the tax regime.
