Income Tax Return: Under Section 16 of the Income Tax Act 1961, standard deduction can be claimed by salaried individuals including salaried professionals and pensioners. When a taxpayer claims standard deduction while filing his annual income tax return, it reduces the amount of taxable income without submitting any investment proof.
Income Tax Saving: There are many ways to save tax. Of these, Standard Deduction is also a way through which tax saving can be done. Standard deduction refers to a flat deduction of one’s income from gross salary on which no tax is levied. The best thing about standard deduction is that it can be claimed as exemption without showing any proof of expenditure.
Standard deduction
Standard deduction can be claimed by salaried individuals including salaried professionals and pensioners under section 16 of the Income Tax Act, 1961. When a taxpayer claims standard deduction while filing his annual income tax return, it reduces the amount of taxable income without submitting any investment proof. The government revises the standard deduction almost on a regular basis keeping in mind the rise in inflation.
No paperwork required
Another key feature of this type of deduction is that no paperwork is required to claim this type of deduction on income, unlike earlier deductions like traveling allowance and medical allowance. For claiming deductions like traveling allowance and medical allowance, bills had to be submitted, which involved huge amount of paper work.
Calculating the Standard Deduction
Standard deduction is deducted directly from gross salary. The government has fixed the deduction limit of Rs 50,000 in a financial year, this exemption is available without showing any proof of investment and expenditure. This flat deduction of Rs 50,000 reduces the total taxable income of an individual.
Standard Deduction under the new tax regime
Earlier the provision of standard deduction was limited only to those opting for the old tax system, but in this year’s budget, the government has added this deduction facility under the new tax system as well. Hence, it has been made universal and one can claim standard deduction of Rs 50,000 irrespective of tax regime.
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