Missed filing your ITR?

You can still file it on Cleartax in just minutes

Standard Deduction for Salaried Individuals

Updated on: Jul 31st, 2023


9 min read

social iconssocial iconssocial iconssocial icons

The Income Tax Act is not only provides provisions for imposing taxes on the income of citizens but also offers number of ways through which one can claim deductions and rebates. The deductions are allowed based on the way the taxpayers spend their income.

One such deduction offered to salaried individuals is the standard deduction. You must know that salaried individuals and pensioners can claim a certain amount under standard deduction by default without any investment or spending of money by the taxpayers. The provision was taken down for a number of years and was re-introduced during the Budget announcement in 2018.

Here is everything you should know about the standard deduction for salaried individuals.

Purpose of Standard Deduction 

The introduction of standard deduction aims to achieve the following:

  • Simplify tax filing by reducing paperwork and enabling deductions regardless of actual expenses.
  • Offer tax relief specifically to middle-class salaried individuals.
  • Extend benefits to pensioners through the standard deduction.

Budget 2023 Update

Salaried taxpayers are now eligible for the standard deduction of Rs. 50,000 under new tax regime from FY 2023-24.


Middle class tax payers & Budget 2019

Standard Deduction – Union Budget 2018

The Finance Minister Jaitley introduced Standard Deduction of Rs. 40,000 in Budget 2018, giving the salaried class something to rejoice about. It replaced the transport allowance Rs. 19200 and medical reimbursement of Rs. 15,000 per annum.

Interestingly, the provision of Standard Deduction was earlier available. However, it was abolished in the Finance Act 2005. 

The standard deduction is usually deducted from the gross salary and claimed as an exemption. This deduction can be claimed by all salaried employees irrespective of category and need of any investment. 

Standard Deduction – Interim Budget 2019

The Interim Budget presented on 1 February 2019 included numerous tax benefits for the salaried and the middle class. Among them, an additional amount of Rs. 10,000 (increased from Rs.40,000) to the Standard Deduction is a noteworthy move.

With the Standard Deduction being Rs 50,000 now (no change was made in Budget 2020 and 2021), it will help taxpayers immensely to reduce their tax outgo Let us understand this with a small example:

ParticularsUntil AY 2018-19From AY 2019-20From AY 2020-21
Gross Salary (in Rs.)8,00,0008,00,0008,00,000
(-) Transport Allowance19,200Not ApplicableNot Applicable
(-) Medical Allowance15,000Not ApplicableNot Applicable
(-) Standard DeductionNot Applicable40,00050,000
Net Salary7,65,8007,60,0007,50,000

From the above, it is evident that the taxable salary has come down on account of the standard deduction.

Taxpayers Receiving Pension

In a recent clarification issued by the income tax department, if a taxpayer has received a pension from the former employer, it is taxable under the head ‘Salaries’.

Therefore, the taxpayer can claim a standard deduction of Rs. 40,000* or the amount of pension, whichever is less.

*Increased to Rs 50,000 since FY 2019-2020 (AY 2020-21) through the Interim Budget 2019.

Our Take

All said and done, though the impact of this amendment for the salaried may appear to be minimal, employers, with this move, would stand to gain in terms of being spared of a whole lot of administrative efforts in processing medical bills of its employees. Perhaps, that was the intention of the legislature.

Standard deduction in New Tax regime

Budget 2020 introduced new tax regime. Under this new regime, the taxpayers have an option to pay concessional tax rates, however major deductions and exemptions are not allowed under this new regime. 

Standard deduction allowed from salary income is also not allowed if the taxpayer for filing of return in the new tax regime.

ParticularsOld Tax regime (FY 2021-22)New tax regime (FY 2021-22)
Salary income 5,00,0005,00,000
Standard Deduction (50,000)N.A
Taxable salary 4,50,0005,00,000

How is standard deduction calculated in case of multiple employers in one year?

The standard deduction is available as a flat deduction from the total salary earned by the employee in a particular financial year. It does not depend on the number of jobs changed by the employee. Hence one flat deduction is available for the cumulative salary earned from all the employers. For FY 2020-21, standard deduction remains same as the previous year at Rs.50,000.

Documents required for standard deduction 

No supporting documents are required to claim the standard deduction for salary income. However, for general income tax return filing, you will need to provide the following documents and complete the necessary forms:

  • Bank statements for the relevant financial year.
  • Income statements from interest or fixed deposits.
  • TDS (Tax Deducted at Source) certificates.
  • Investment documents.
  • Form 26AS and Form 1040.

Who is eligible to claim a standard deduction?

The standard salary deduction can be claimed by individuals receiving salary and pension, excluding business owners. However, there are certain cases where eligibility for standard salary deduction is not applicable, including:

  • Married individuals filing separately if the spouse itemizes deductions.
  • Taxpayers with dual status or non-resident alien status during a specific fiscal year.
  • Taxpayers filing returns for a period less than one year.

Frequently Asked Questions

How can I claim the standard deduction in ClearTax software?

ClearTax e-filing software automatically considers the deduction amount of 50,000 while e-filing, if you are a salaried person.

Can I claim deduction of 50,000 for previous returns also?

No, you can claim deduction of 50,000 from previous year 2019-2020 only. Before that the limit was of 40,000.

Can I claim transport allowance and medical allowance as well along with standard deduction?

No, you can claim only standard deduction of 50,000 and not the transport and medical allowance.

Related Articles

New tax regime-Section 115BAC

Calculate taxes- Income Tax Calculator – FY 2020-2021, AY 2021-2022

Income Tax Slabs 2021 & Tax Rates for FY 2020-21/ FY 2019-20/ FY 2018-19

Income Tax in India : Basics, slabs and E-filing Process 2021

New Income Tax Portal – Intro & Key Features of the e-Filing Portal

inline CTA
File your returns in just 3 minutes
100% pre-fill. No manual data entry

Clear offers taxation & financial solutions to individuals, businesses, organizations & chartered accountants in India. Clear serves 1.5+ Million happy customers, 20000+ CAs & tax experts & 10000+ businesses across India.

Efiling Income Tax Returns(ITR) is made easy with Clear platform. Just upload your form 16, claim your deductions and get your acknowledgment number online. You can efile income tax return on your income from salary, house property, capital gains, business & profession and income from other sources. Further you can also file TDS returns, generate Form-16, use our Tax Calculator software, claim HRA, check refund status and generate rent receipts for Income Tax Filing.

CAs, experts and businesses can get GST ready with Clear GST software & certification course. Our GST Software helps CAs, tax experts & business to manage returns & invoices in an easy manner. Our Goods & Services Tax course includes tutorial videos, guides and expert assistance to help you in mastering Goods and Services Tax. Clear can also help you in getting your business registered for Goods & Services Tax Law.

Save taxes with Clear by investing in tax saving mutual funds (ELSS) online. Our experts suggest the best funds and you can get high returns by investing directly or through SIP. Download Black by ClearTax App to file returns from your mobile phone.

Cleartax is a product by Defmacro Software Pvt. Ltd.

Company PolicyTerms of use


ISO 27001

Data Center


SSL Certified Site

128-bit encryption