Standard Deduction in New Tax Regime- Finance Minister Nirmala Sitharaman has taken several steps in the budget to make the new tax regime more attractive. Adding the benefit of Standard Deduction is also included in the steps taken in the budget.
New Delhi. Finance Minister Nirmala Sitharaman in her budget speech had talked about giving the benefit of standard deduction to the employees adopting the new tax regime.
He had said that now employees with income above 15.5 lakhs will get a total tax benefit of Rs 52,500 (standard deduction Rs 50,000). Confusion had arisen because of Sitharaman’s statement that employees earning less than 15.5 lakhs would not get standard deduction?
Now the Central Board of Direct Taxes (CBDT) has issued a clarification on this. CBDT said that the benefit of standard deduction will be available to all employees adopting the new tax regime, irrespective of their income.
The benefit of standard deduction was already being given to the employees and pensioners adopting the old tax regime. At the same time, in the budget 2023, the Finance Minister had announced to give its benefits to the employees adopting the new tax system and also to the family pensioners.
Employees will get a deduction of up to Rs 50,000, while family pensioners will be given a tax deduction of Rs 15,000 as standard deduction.
CBDT clarified the situation
In a post-budget clarification, CBDT Chairman Nitin Gupta told news agency PTI that all salaried taxpayers will be given the benefit of standard deduction in the new regime.
Gupta said that in the budget speech, the Finance Minister had mentioned the income of 15.5 lakhs just to explain how much benefit would be available to those with this much income. This does not mean that only those earning above fifteen lakhs will get the benefit of standard deduction.
What is standard deduction?
Standard deduction is the deduction that is deducted from the income of the income tax payer and after that tax is calculated on the remaining income. Suppose the annual income of a person doing a job is Rs 8 lakh.
In such a situation, if the benefit of standard deduction up to Rs 50,000 is available in the total package, then their tax will be calculated on Rs 7,50,000 instead of Rs 8 lakh. No paper has to be given to get this discount.
When will the new rule be applicable?
Under the new tax regime, the standard deduction benefit will be applicable from assessment year 2024-25, i.e. it can be availed on filing income tax returns after FY 2023-24.
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