Wednesday, 5 April 2023

Every employee can avail of standard deduction

   

Every employee can avail of standard deduction

The deduction is limited to Rs 50,000/- or the actual salary, whichever is lower.

THE PROVISION FOR standard deduction went through a major change in Budget 2018. In order to provide relief to salaried taxpayers, it was proposed to allow a standard deduction of Rs 40,000/- in lieu of the erstwhile exemption of transport allowance and reimbursement of miscellaneous medical expenses.

There was some major advantage to this proposal. Firstly, the standard deduction was available to all individuals with income from salary and did not require submission of any proof. By eliminating paperwork and compliance, the administrative burden of the tax department was also alleviated. Further, the decision to allow standard deduction significantly benefit pensioners also, who normally did not enjoy any allowance on account of transport and medical expenses.

Overtime the threshold for standard deduction was increased from Rs.40,000/- to 50,000/- and now the standard deduction is available to all individuals with salary income, irrespective of the tax regime they opt for. So, if you are new to the world of tax, here is everything you need to know about standard deduction:

Not all individuals can claim standard deduction

Standard deductions are available only to individuals earning income from salary or pension. The said income may be earned from employment in India or outside India. For individuals earning income from business or sources other than salary and pension, this deduction is not available. For example, if you are receiving rental income, standard deduction under Section 16 (ia) of the income-tax Act will not be available.

An annual deduction

The standard deduction of Rs 50,000/- available is an annual amount, which comes to around Rs 4,167 per month. 

Mandatory deduction

The amount of standard deduction is automatically computed while filling the income tax return. It is irrelevant whether the individual has incurred any expenses or not pertaining to his exercise for employment. It is mandatory available to all salaried individuals.

No loss can be claimed on account of this tax relief.

The amount of deduction is restricted to 50,000/-or salary, whichever is lower. Accordingly, no losses can arise on account of standard deduction and if salary income is lower than Rs. 50,000/-

By allowing the standard deduction under the new tax regime more attractive. The paperwork involved to claim deduction is significantly reduced and eventually, the burden of the tax administrative will be mitigated.

FOR EMPLOYEES 

Only those earning income from salary or pension can avail of standard deduction.

Since it is automatically computed, no proof of expenses is needed.

This deduction is available under both old and new tax regime.



For More Details: Pooja Manoj Gupta, visit www.giia26.com
Email: pmgiia26.com Mobile 
9868944340

 

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