Here's a look at what standard deduction is and its effect post Budget.
What is standard deduction?
It is a fixed deduction from your salary irrespective of your designation.
How is it helpful?
Since a fixed amount is deducted, it reduces your taxable income immediately and hence the tax paid eventually.
Who can claim it?
What is the amount of standard deduction?
|
Salary Slab |
Standard Deduction |
|
Rs 75,000 to Rs 500,000 |
40% of salary or Rs 30,000, whichever is lower |
|
Above Rs 500,000 |
Rs 20,000 |
Salary includes any wages, annuity, pension, gratuity, fees, commission, perquisite, any advance of salary, leave encashment, etc less deductions under Section 10 of the Income Tax Act, like house rent allowance and conveyance allowance.
What if you have two employers in a year?
Even if you have shifted jobs in a year, the maximum amount of standard deduction remains the same.
Pre Budget
|
Salary |
Rs 440,000 |
Rs 550,000 |
|
Standard Deduction |
Rs 30,000 |
Rs 20,000 |
|
Net Salary |
Rs 410,000 |
Rs 530,000 |
Post Budget
|
Salary |
Rs 440,000 |
Rs 550,000 |
|
Standard Deduction |
0 |
0 |
|
Net Salary |
Rs 440,000 |
Rs 550,000 |
The taxable income is increased to Rs 440,000 and Rs 550,000 (post Budget) as against Rs 410,000 and Rs 530,000 (pre Budget) respectively. Without standard deduction, you will be taxed on a higher income.
The good news is, even though the standard deduction has been taken away, the net tax payable will be
less (post budget), due to the revised tax rates. So there is still reason to smile!
Cnergies is an end-to-end solution provider for Tax-Payroll-HR and provident fund