Standard Deductions

What is standard deduction

Standard deduction is a flat deduction to an individual’s earnings of salary/pension income. Standard deduction will reduce the Taxable Income.

When Standard Deduction was Introduced

The Finance Minister Jaitley introduced Standard Deduction of Rs. 40,000 in Budget 2018

Standard deduction was first introduced in the year 1974 under section 16 of the income tax Act 1961. Later it was abolished with the effect from Assessment year 2006-2007. Recently in 2018 Government of India proposed to re-introduced Standard deduction for only a selected group of individuals.

This deduction amount in the financial year of 2018-19 is given as ₹40000, later in 2019 it was increased to ₹ 50000.

Standard Deduction Impact on Tax on Salary Income

ParticularsOld Tax regime (FY 2021-22)New tax regime (FY 2021-22)
Salary income 5,00,0005,00,000
Standard Deduction (50,000)Not applicable
Taxable salary 4,50,0005,00,000

The salaried Employees can claim exemption of Rs. 50000 from their Income. Taxpayer can avail the standard deduction directly from their Gross Salary.

Deductions U/S 16

Standard Deduction 16(i)

Employees who are receiving salary from his Employers will get an amount of 50000 exemption directly.

Entertainment Allowance 16(ii)

This allowance will be applicable only for Government Employees, The amount of deduction 5000/ actual amount spent whichever is lower.

Professional Tax 16(iii)

It is taxable when it paid, amount of deduction is 200 per month/Actual amount paid whichever is higher.