Standard Deduction in Income Tax

The Income Tax Act, 1961, allows you to claim a standard deduction in income tax and rebates. This benefits salaried individuals as well as senior citizens. This is because it helps lower your net taxable income and tax liability. 

Read on to learn what income tax standard deduction is, how it is calculated, and more.

According to the Indian taxation system, salaried employees and senior citizens can claim deductions of ₹50,000 on their salary and pension amount. In the financial year 2018-19, the maximum deduction amount was ₹40,000. 

 

However, from FY 2019-2020 onwards, the maximum deduction amount was increased to ₹50,000. You can claim this tax benefit irrespective of the amount that you spend on transport or medical allowance. 

The purpose of the standard deduction is to provide relief to salaried individuals belonging to the middle class and simplify the tax filing process.

If you are a salaried individual, you can claim an income tax standard deduction of ₹50,000 from your gross salary. To understand the deduction in a better way, check out this table. 

Senior citizens receive a pension, which is taxable under the ‘Income from Salary’ head. While actual salaries get a standard deduction of ₹50,000, it is different for senior citizens. 

Under Section 16, the standard deduction for senior citizens is either ₹50,000 or the amount of pension in a financial year, whichever is less.

The calculation of standard deduction in income tax is as per the stipulations and amendments. 

 

Here is an example of how standard deduction has progressed: 

You can claim income tax standard deduction while filing your tax return. Generally, employers consider your standard deduction while calculating your payable tax. This calculation helps your employer to deduct your Tax Deducted at Source (TDS). 

 

You need to file the ITR before the due date announced by the Income Tax Department. In case there are any extensions on the last date to file the ITR, the IT department will notify about the same.

Check out other deductions that salaried individuals can benefit from.

• Section 80C

Section 80C of the Income Tax Act offers a maximum deduction of ₹1.50 Lakhs on investments. In addition, Section 80CCC offers a deduction for an annuity plan of LIC or other insurance companies.

• Section 80D

Under Section 80D, you can claim a deduction of ₹25,000 on insurance for yourself, spouse, and dependent children. Also, an additional deduction of ₹25,000 is available for parents’ insurance if they are below 60 years and ₹50,000 if they are above 60 years.  

• Section 80E

Section 80E allows you to claim deductions on interest that you pay during the repayment of education loans for higher studies. This deduction is applicable whether you availed the loan for your spouse, children, or a student for whom you are a legal guardian.

Here are other deductions for senior citizens or pensioners.

• Section 80D

According to Section 80D, senior citizens can avail of ₹50,000 on the payments of health insurance premiums.

• Section 80TTB

Section 80TTB offers a deduction of up to ₹50,000 for senior citizens on interest from bank accounts and deposits, post office deposits, and deposits with NBFCs.

• Section 80DDB

Section 80DDB allows a deduction of up to ₹1 Lakh for senior citizens for medical treatment. These include some specific ailments and diseases.

 

With this information in hand, you can claim standard deduction income tax and other deductions to save on taxes. 

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