Income Tax rules: All you need to know about standard deduction benefit
New Delhi: For the financial year FY19, all salaried employees and pensioners will be eligible for a standard deduction of Rs 40,000 from their taxable income. Finance Minister Arun Jaitley reintroduced standard deduction in this year’s budget in lieu of the transport allowance (Rs 19,200 per annum) and medical reimbursement (Rs 15,000 per annum) which a salaried employee was claiming earlier. The net impact of the introduction of standard deduction and removal of medical reimbursement and transport allowance benefits would reduce the taxable income of salaried employees by Rs 5,800.
Here is all you need to know about standard deduction:
Standard deduction is a flat deduction allowed from income of a salaried individual towards expenses incurred in relation to their employment.
Unlike, medical reimbursement, no documents are required to be submitted to avail standard deduction benefit.
The standard deduction will help salaried employees in the 30 per cent bracket to save around Rs 1,800 in tax. Those in the 20 and 10 per cent bracket will save around Rs 1150 and Rs 580 respectively.
Pensioners are the clear beneficiaries of standard deduction as they neither get conveyance allowance nor medical reimbursement but still, they will get a flat standard deduction of Rs 40,000 on their pension.
Standard deduction was also given to employees earlier until it was abolished with effect from the assessment year 2006-07. At that time, standard deduction was Rs 30,000 or 40 per cent of salary whichever is less for gross salary up to Rs 5 lakh. For gross salaries of more than Rs 5 lakh, standard deduction was Rs 20,000.
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