What is Standard Deduction: While presenting the budget in the Lok Sabha on 23 July, Finance Minister Nirmala Sitharaman made a big announcement of increasing the standard deduction. After all, what is this standard deduction, which has a big impact on salaried people.
Nirmala Sitharaman on Standard Deduction: The Modi government has increased the limit of standard deduction of income tax in the financial year 2024-25. Finance Minister Nirmala Sitharaman, while presenting the budget in the Lok Sabha on Tuesday, announced to increase the standard deduction limit to Rs 75,000 under the new tax regime. Along with this, he also increased the standard deduction limit for family pensioners from Rs 15,000 to Rs 25,000. He said that people have liked the new tax regime very much and in the financial year 2023-24, one-third of the tax payers have filed returns under the new tax system.
Standard deduction limit increased
Let us tell you that at present, a standard deduction of Rs 50,000 is available under the new and old tax regime. This standard deduction applies to those who have income from salary or pension. Only these people can claim this standard deduction. At the same time, people receiving family pension under the Income Tax rules were entitled to get a tax exemption of Rs 15,000 under the old and new tax regime, which has now been increased.
One thing to note in this case is that if you receive annuity payments from insurance companies in the form of pension, then it is considered taxable income under the ‘income from other sources’ category. Hence, they are not eligible for standard deduction.
What is standard deduction?
Standard deduction applies to individuals who run their households from salary in government or private sector. To claim this deduction, employees do not need to submit any proof or documents to their company or IT department. However, it is necessary to show the receipt of salary/pension income. Under this, a standard deduction of up to Rs 50,000 was allowed on annual income.
Till FY 2022-23, standard deduction was available only under the old tax regime. However, from FY 2023-24, salaried taxpayers have been made eligible for standard deduction up to Rs 50,000 in the new tax regime as well. Standard deduction can also be claimed in case of income from pension, provided the pension received is charged under ‘Income from salary’ and not under ‘Income from other sources’.
What will happen with the reduction in standard deduction?
According to finance experts, people doing their own business get income tax exemption by paying bills for many things, whereas salaried employees do not have such an option. Their income tax is already deducted by the company. In such a situation, the government has tried to provide relief to salaried employees by increasing the limit of standard deduction by Rs 25 thousand.
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