The standard deduction was introduced for the salaried taxpayers under Section 16 of the Income Tax Act. It allows salaried individuals to claim a flat deduction from income towards expenses incurred in relation to his or her employment. There is no proof required in order to claim this deduction.
It has been introduced to bring parity between salaried employees and self-employed individuals. While self-employed individuals can claim various business-related expenses as deductions that bring down their taxable income, no such benefit could be claimed by most salaried individuals. It is a flat deduction of INR 50,000/- from AY 2020-21 to your “Income taxable under the head salaries”.
This benefit is available to all salaried individuals irrespective of their annual income and no bill expenses have to be submitted for claiming this benefit. It helped employees more in terms of reduction in their tax liability. These are generally deducted from the gross salary and claimed as an exemption. This tax benefit can be claimed irrespective of the actual amount spent on
Let us understand how this deduction works in this section by calculating the tax outgo before and after standard deduction. For example, Mr. Arjun has a taxable income of INR 7 lakh for FY 2019-20.
|PARTICULARS||Before (INR)||After (INR)|
|– Transport Allowance||19,200||NA|
|– Medical Allowance||15,000||NA|
|– Standard Deduction||NA||50,000|
|Net Taxable Income||6,65,800||6,50,000|
Therefore, as per the above calculations it can be seen that taxable salary has been brought down on account of the standard deduction.
As per a recent clarification issued by the Income Tax Department, if a taxpayer has received income from a pension from the former employer, it shall be taxable under the head “Salaries”. Therefore, taxpayers receiving a pension from their ex-employers are eligible to claim a standard deduction of INR 50,000 or the amount of pension, whichever is less. Further, the benefit of this deduction will be allowed to pensioners only if it is taxable as salary income. In case it is charged to tax as other source income then the benefit of the standard deduction will not be available.
The eligible amount for this deduction cannot exceed the salary amount. The maximum amount of deduction will be:
Let us understand the calculation of Salary income by claiming standard deduction with a small example. Given below are salary details for FY 2019-20
Rs. 50,000 or
Amount of salary i.e. 20,000
(whichever is lower)
Our Finance Minister, Nirmala Sitharaman in budget 2020 has introduced a new tax regime (FY 2020-21) under which income would be taxable at lower rates. To avail of this option, the taxpayer will have to forego major tax exemptions and benefits including standard deduction.
|Particulars||FY 2020-21 (Old Tax Regime)||FY 2020-21 (New Tax Regime)|
|Income from Salary||4,50,000||4,50,000|
|Less: Standard Deduction||50,000||–|
Yes, a taxpayer can claim various other deductions, such as those available under tax-saving investments available under Section 80C (PPF, ELSS Funds, etc) to Section 80U.
No, you can claim a deduction of INR 50,000 from previous year FY 2019-2020 only. Before that the limit was of INR 40,000 was applicable.
Yes, standard deduction is available to all salaried taxpayers & pensioners irrespective of their age.
No, you do not have to submit any medical or travel bills in order to claim standard deduction.