Standard deduction means the flat deduction of 50,000 Rs from the income which is taxable under the head of salaries. This type of benefit can be claimed irrespective of the amount spent on transport allowances and on medical allowances. However, it’s up to taxpayers to choose whether they want a standard deduction or itemized deduction. Most individuals choose standard deductions because it isn’t complicated, and one does not need to keep a track of every possible qualifying expense.
The standard deduction basically refers to that portion of income that is not subjected to tax or taxable. It can be used to reduce tax bills. The IRS or Indian Revenue Officer who is a bureaucrat adjusts deductions each year for inflation. The amount of standard deduction depends on many factors such as your filing status, age and whether a person is disabled or claimed as a dependent on someone else’s tax return.
In the financial year, 2018-19 the standard deduction amount was 40,000 Rs. Usually, the Indian taxation system allows a flat deduction to individuals earning salaries by working in companies or in organizations or individuals getting pensions.
The standard deduction was then increased to 50,000 Rs in 2019. The taxpayers are not required to submit any disclosures or investment proofs to avail of this deduction. It’s up to the individual taxpayers who can either choose the pre-existing itemized deduction or the standard deduction of Rs 50,000 in the year 2022.
There are various purposes for standard deductions. These are mentioned below:
The impact of the standard deduction on salaried employees is given below in the table.
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An itemized deduction is a type of expense that can be subtracted from adjusted gross income also known as AGI to reduce the tax bills.
Section 16(ia) of the Income Tax Act deals with the Standard Deduction.
Yes, the benefit of the standard deduction is available to both state and central government employees.