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The Income Tax Act 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.
The introduction of standard deduction aims to achieve the following:
The standard deduction is allowed under the both the regimes i.e old tax regime and new tax regime. The standard deduction under the new regime was increase under the new regime in budget 2024. Here's a breakdown of the standard deduction available under each regime:
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.
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 ‘Income from Salaries’.
Therefore, the taxpayer can claim a standard deduction of Rs. 50,000/Rs. 75,000 or the amount of pension, whichever is less.
The standard deduction is a fixed amount available to salaried individuals, directly reducing taxable income and, in turn, lowering their tax liability and overall tax burden.
No supporting documents are required to claim the standard deduction for salary income. However, for filing income tax returns, you will need to provide the following documents and complete the necessary forms:
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