Standard Deduction: Income taxpayers can lower their income without providing any documentation or disclosures by using the standard deduction, which is a fixed sum subtracted from taxable salary income. After being eliminated for several years, the standard deduction provision was reinstated in the 2018 budget announcement. Under Section 16 of the Income Tax Act of 1961, it was initially implemented in 1974.
"In FY 2004-05, salaried individuals could claim a standard deduction of ₹30,000 or 40 per cent of their salary, whichever was lower, provided their annual income did not exceed ₹5 lakh. For those earning above ₹5 lakh, the standard deduction was ₹20,000. However, this deduction was withdrawn starting from FY 2005-06," said Balwant Jain, a Mumbai-based tax and investment expert.
All salaried employees are eligible for the standard deduction, regardless of their salary amount.
1)To claim this deduction, you don't have to maintain documentation or provide evidence of various expenses, including investments, medical bills, or travel receipts.
2)The standard deduction directly lowers your taxable income by deducting a fixed amount from your gross income.
3)The standard deduction is available to most salaried individuals and pensioners.
It remains to be seen whether the standard deduction will be further changed in Budget 2025, especially considering the different amounts available under the two tax regimes.
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