The standard deduction is a flat deduction of Rs. 50,000/- to your “Income taxable under the top salaries” of Section 16(a) of the Income Tax Act deals with the standard deduction.
This tax benefit can be claimed irrespective of the actual amount spent on
- Transport Allowance
- Medical Allowance
What is the Main Purpose of Standard Deduction
- To reduce paperwork and allow deductions in actual expenses SD is needed.
- In addition, Providing tax relief to middle-class salaried individuals.
- Standard Deduction equally benefits pensioners.
What is the Impact of SD over Salaried Employees for Tax
- It helped middle-classes employees in reducing their overall tax liability.
- The overall extra deduction benefit was Rs. 5,800 (Rs. 15,800/- for FY 2019-20).
Given down is the Complete Calculation of Tax Impact because of the Standard Deduction
|F.Y. 2019-20 & F.Y. 2020-21 (old regime)||F.Y. 2018-19|
|Less: HRA exemption||60,000||60,000|
|Less: LTA exemption||85,000||85,000|
|Less: Transport Allowance||–||–|
|Less: Medical Allowance||–||–|
|Less:- Other exemption||20,000||20,000|
|Net Salary (A)||7,35,000||7,35,000|
|Less : Standard Deduction(B)||50,000||40,000|
|Income Tax on (C)||49,500||51,500|
|Add : Cess @ 4%||1980||2060|
|Tax saving compared with FY 18-19||2080|
Also, read | Exemption of House Rent Allowance (HRA)
What is the Limit of SD?
According to it, the amount of SD cannot overtake the salary amount. The maximum amount of deduction will be Rs. 50,000/- or Salary amount whichever is lower.
Is Standard Deduction Applicable for Pensioners too?
It is equally out there for pension received from your old employer to the extent of ₹50,000 per annum.
Impact of Standard Deduction on Pensioners
- SD benefits pensioners the most because they didn’t enjoy any other allowance such as medical or transportation.
- In addition, the SD will only be allowed if it is taxable for the salaried income.
- Hence, if it is taxed as another source of income then the benefit of the SD will not be available.
Standard Deduction Impact on Salary Income
|Particulars||FY 2020-21 (Old Tax Regime)||FY 2020-21 (New Tax Regime)|
|Income from Salary||3,50,000||3,50,000|
|Less: Standard Deduction||50,000||–|
Difference Between Standard Deduction Between FY 2019-20 and FY 2020-21
|Standard Deduction on salary for FY 2019-20||Standard Deduction on salary for FY 2020-21|
FAQs Related to Standard Deduction
- Did the standard deduction apply to senior citizens also?
Yes, the SD applies to all salaried taxpayers & pensioners irrespective of their age.
- Can I claim the standard deduction even if my income is quite Rs 5,00,000?
The standard deduction is out there regardless of your tax slab. However, the benefit would tend to you if you’ve got salary income. The amount of salary is irrelevant during this case.
- Do I want to submit proof to claim standard deduction under Income Tax?
The SD is a flat deduction, which does not require any employee to present any evidence to the employer / IT department.
- Can an employee claim the two of them standard deduction & income tax deduction?
Yes, an employee can claim the two of them standard deductions & income tax deductions.
- What deductions I can take if I use SD?
Hence, if you take the SD on your 2020 tax return, you can deduct up to $300 for cash donations to the charity you made during the year.
- Which section of the Income Tax Act enfolds SD?
Section 16(a) of the Income Tax Act deals with the SD.
- Whether the standard deduction is calculated monthly?
The standard deduction is not calculated monthly. However, a flat deduction is allowed for a complete year.
- Is SD applicable to employees of Central or State Government?
Yes, the SD is out there to central or state government employees.
- Are standard deductions of Rs 50,000 under section 16 applicable to an individual whose only source of income is interest from FDs?
No, SD is only accessible from salary & pension income and not on Income from other sources.
- My payslip says that I even have deductions under sections (10) and (17), amounting to INR 87168. What does this mean?
However, this means that you are eligible to claim the same exemption from your salary income in respect of various allowances and perquisites, etc also.
- How can I claim a deduction not made by the employer in Form-16?
Hence, You can claim deductions at the time of return filing if an equivalent isn’t accounted for by the employer, provided you’re eligible to say the deduction.
- What does the SD include?
Many costs and allowances are deductible, including donations, mortgage interest, student loan interest, some business-related costs, and other medical expenses as well as.
- How does the SD affect my tax return?
The SD decreases the amount of income you have to pay taxes on.
- Who is not eligible for the SD?
A person who was a non-resident foreign or dual-class foreigner during the year.
A person who files a return for less than 12 months due to a change in his annual accounting period.
- Can I deduct property taxes if I took the SD?
Hence, If you would like to deduct your land taxes, you want to itemize. Furthermore, you cannot take the quality deduction and deduct your property taxes.
For 2019, you’ll deduct up to $10,000 ($5,000 for married filing separately) of combined property, income, and sales taxes.