Standard Deduction: The standard deduction has been kept at Rs 75,000. Standard deduction is a deduction that is deducted from your income and after this tax is calculated on the remaining income.
Standard Deduction: In this year’s budget (Budget 2025), Finance Minister Nirmala Sitharaman has made a big announcement regarding income tax. She has made income up to Rs 12 lakh tax free. At the same time, the standard deduction has been kept at Rs 75,000 only. Standard Deduction is a deduction which is deducted from your income and after this tax is calculated on the remaining income. Understand who gets the benefit of this.
Who can take advantage
Salaried employees and pensioners get the facility of getting tax exemption through standard deduction. If you choose the new tax slab to pay income tax, then you will get the benefit of standard deduction of Rs 75,000. On the other hand, salaried taxpayers get only a standard deduction of Rs 50,000 if they choose the old tax regime.
Understand with an example
Suppose you are a salaried person and your annual income is 13 lakhs and if you choose the new tax regime, then the standard deduction will be reduced by Rs 75,000. Now Rs 12,25,000 will be left, tax will be levied on it according to the slab. On the other hand, if your income is Rs 12,75,000, then according to the new tax regime, you will not have to pay income tax because income up to 12 lakhs is tax free and you will get the benefit of standard deduction of Rs 75,000. On the other hand, if you choose the old tax regime on an annual income of 13,00,000, then you will get the benefit of standard deduction of up to Rs 50,000 in the total package. In such a situation, your tax will be calculated on Rs 12,50000 instead of 13 lakhs.
After 2005, it was implemented again in 2018
In India, there was a provision of standard deduction for salaried persons before the year 2005, but it was discontinued in the budget of that year. Instead, a provision was made for deduction of Rs 19,200 in the form of transport allowance and Rs 15,000 in the form of medical allowance in some special items. But the employees were not satisfied with this. The employees believed that businessmen and consultants claim exemptions by showing many types of expenses, but salaried people have very few options. To address this complaint of the employees, the government again implemented standard deduction in the budget of the year 2018. But the exemption in the form of transport allowance and medical reimbursement was abolished.
What is the benefit of standard deduction
Standard deduction is better for employees than the exemptions in the form of transport allowance and medical reimbursement because there was more paperwork to get the exemption of transport allowance and medical reimbursement. Whereas through standard deduction, the amount is deducted directly from the gross salary of the salaried person and after this the taxable income is determined on the remaining salary.
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