Document

Standard Deduction for Salaried Individuals in New & Old Tax Regime

Updated on: Jun 5th, 2024

|

4 min read

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.

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

Who is Eligible to Claim a Standard Deduction?

The standard salary deduction can be claimed by individuals receiving salary and pension, excluding business owners i.e. any individuals having income under the head salary will be eligible to claim a standard deduction up to Rs 50,000.

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 2024 Update

Salaried taxpayers are eligible for the standard deduction of Rs. 50,000 under the old and new tax regime from FY 2023-24. There has been no update in Budget 2024.

Standard Deduction in New Tax regime

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

Budget 2023 was amended, allowing to claim a standard deduction of Rs 50,000 in the new regime as well. Thus now you will be able to claim the standard deduction of Rs 50,000 both under the new and old regime.

How is standard deduction calculated in the 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 2023-24, the standard deduction remains the same as the previous year at Rs.50,000.

Standard Deduction – Union Budget 2018

Finance Minister Arun Jaitley introduced a standard deduction of Rs. 40,000 in Budget 2018, giving the salaried class something to rejoice about. It replaced the transport allowance of 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 a deduction. 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, it will help taxpayers immensely to reduce their tax outgo. Let us understand this with a small example:

Particulars

Until AY 2018-19

From AY 2019-20

From AY 2020-21

Gross Salary (in Rs.)

8,00,000

8,00,000

8,00,000

(-) Transport Allowance

19,200

Not Applicable

Not Applicable

(-) Medical Allowance

15,000

Not Applicable

Not Applicable

(-) Standard Deduction

Not Applicable

40,000

50,000

Net Salary

7,65,800

7,60,000

7,50,000

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

standard deduction budget 2019

Standard Deduction for Pensioners

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 or the amount of pension, whichever is less.

Documents Required for Standard Deduction 

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:

  • 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 AIS.

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

Can't get yourself started on taxes?
Get a Cleartax expert to handle all your tax filing start-to-finish

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 a deduction of 50,000 for income tax returns filed prior to 2019- 20 as well?

No, you cannot claim a deduction of Rs. 50,000 for the years prior to 2019-20 as the limit then was Rs 40,000.

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

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

I have income from freelancing. Can I claim the standard deduction?

No, Standard deduction is applicable only for individuals having income from Salary. Since Freelancing is considered as income from business and profession same is not eligible for the standard deduction.

Who can claim standard deduction?

Only those individuals having income from Salary can claim the standard deduction.

Is standard deduction of Rs 50,000 applicable in new tax regime?

Yes , As per Finance Act 2023 standard deduction is eligible for deduction both in new and old regime.

What is the standard deduction for FY 2024-25?

The standard deduction for FY 2024-25 is Rs. 50,000. 

logomaster-card

Pay taxes with your Mastercard credit card & enjoy benefits such as

  • Interest free credit period
  • Easy EMI conversions
  • Earn reward points
Use code: CTMASTER For Additional 10% Off!

*T&C apply disclaimer

logo-mastercardlogo-mastercard

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

ISO 27001

Data Center

SSL

SSL Certified Site

128-bit encryption