Standard deduction is available to both private and government employees. It was first introduced in 1974. Later it was discontinued. It was reintroduced in Union Budget 2018
Budget 2025: A big announcement has been made in the first full budget of Modi Government 3.0, giving relief to the middle class. According to this announcement, in the new tax regime, no income tax will have to be paid on income up to Rs 12 lakh annually. The standard deduction for salaried employees is Rs 75 thousand, in such a situation, income up to Rs 12.75 lakh of the salary class will be tax free. Let us know what is standard deduction and how salaried employees can take advantage of it.
Under the Income Tax Act, people working in government and private jobs have got a special relief. People receiving pension can also take advantage of this. This is called standard deduction. In this, a certain amount is allowed to be deducted from the taxable income of a person working. This reduces the taxable income of the person, which also reduces his tax liability.
Under which section is this relief available?
The provision of standard deduction has been included under section 16 of the Income Tax Act, 1961. The special thing is that whether the annual income of the taxpayers is less or more, they are allowed to deduct only a certain amount. Therefore, taxpayers with low income get a lot of relief from this.
When was it started?
Standard deduction was started in 1974. But, later this provision was abolished. It was reintroduced in the Union Budget 2018.
Standard deduction limit in new tax regime and old tax regime
In Budget 2024, Finance Minister Nirmala Sitharaman increased the limit of standard deduction from Rs 50,000 to Rs 75,000. However, this deduction is applicable only in the new tax regime, while there has been no change in its limit in the old tax regime. Salaried taxpayers get only a standard deduction of Rs 50,000 in the old tax regime.
Claiming standard deduction while filing ITR
Standard deduction simplifies the process of claiming deductions for salaried employees. Suppose the gross annual salary under the new tax regime is Rs 10 lakh and standard deduction is Rs 75,000, then the employee’s taxable income will be Rs 9,25,000. Standard deduction can be claimed at the time of filing ITR. The good thing is that unlike other deductions, no documents are required to avail this deduction. If you do a private job, then you will get Form 16 from the company. If you look at it carefully, you will find that the company would have determined your taxable income after giving the benefit of standard deduction.
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