Standard deduction benefit for salaried individual

standard deduction 2019

The standard deduction is reintroduced in budget 2018 and amended in Budget 2019, the purpose is to replace the medical allowance and traveling allowance for the salaried. The standard deduction for ay 2019-20 for the salaried individual is effected from 1st April 2019.

…..the standard deduction is allowed to deduct by ₹ 50000 from FY 2019-20

What is the standard deduction?

Earlier the transportation allowance and medical allowance which were allowed to the employee for that they have to submit the bill of expenditure.

The standard deduction is the replacement of transportation allowance and medical allowance.

It is a fixed amount of deduction from the gross salary of the employee, which was permitted without submitting any proof.

Types of Standard Deduction

There is a fixed amount of deduction under Standard Deduction for two categories:

  • An amount of ₹ 40,000 which can be reduced by taxpayers receiving salary or pension income, from their gross salary.
  • income from rent received is also reduced under standard deduction @ 30%.

Also Read: Why to Pay interest u/s 234A, 234B & 234C under Income tax act?

From the financial year, 2019-2020 standard deduction of ₹ 50000 is permitted. Remeber in FY 2018-19 it is ₹ 40000.

Previously, medical allowance of ₹ 15,000 annually and a transport allowance of ₹ 19,200 per annum are replaced with the standard deduction of ₹ 40000, the effective additional benefit on account of the standard deduction would be an additional income exemption of ₹ 5,800.

Also Read: Section 80D Income-tax Act – Tax benefit for (Health, Medical Treatment)

How to claim Standard Deduction?

There is a misconception among taxpayer, what documents required to submit to the income tax department or your employer.

According to the new provision the amount of ₹ 40,000 (which was amended by ₹ 50,000 from FY 2019-20), is deducted from their gross salary.

Standard Deduction Example

Mr. X is getting an annual salary of ₹ 2,50,000, the assessee is entitled to get ₹ 40000, after deduction of Standard Deduction the applicate will process their ITR.

In some case, it is observed that the salaried employee getting salary ₹ 40,000 and more than ₹ 3,00,000 under head Income from other sources. In that scenario, the employee can deduct 100% of this salary income under the standard deduction.

My bother inlaw joined a corporate and get his first salary for the month of March’2018, on ₹ 60000 per month basis, he is also getting other income.

Now, in this case, he is getting only ₹ 60000 + ₹ 3,00,000, now according to standard deduction he can deduct ₹ 40000 from his taxable income.

*Standard Deduction is amended for ₹ 50000 from FY 2019-20.

If you look closely (FY 2017-18 & FY 2018-19) the taxable

Other Deduction like HRA, 80C must to treated separately.

Standard deduction for senior citizens

In one of the articles from NDTV ” Why Senior Citizens Are Real Beneficiaries Of Flat Deduction Of Rs. 40,000

How?

According to the income tax law, Senior citizen (pensioners) are also treated as salaried, so they are also qualified for the standard deduction of ₹ 50000.

According to the tax department, the pension received from the formal employer is treated as salaried.

Senior citizen (pensioners) unable to claim medical allowance & transport allowance, on the other hand, pensioners are allowed to get 100% benefit of a standard deduction financial year, 2018-2019.

FAQ on standard deduction for salaried Employee

Question: Can I use both standard deduction and personal exemption?
Answer: Yes, After deduction of SD you can avail the benefits of section 80C, HRA and many more.
Question: Is standard deductions of ₹ 40,000 under section 16 applicable to a person whose only source of income is interest from FDs?
Answer: No, standard deductions is especially for salaried and pensioner only.
Question: How will the standard deduction of ₹ 40,000 on income tax help the salaried in India?
Answer: Standard deduction is the replacement of medical and transport allowance to the employee with is ₹ 34200. This way an employee can save ₹ 5800.

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