Apart from imposing taxes, the Income Tax Act also offers different ways by which an individual can claim rebates and deductions. The deductions that can be claimed will depend on how the taxpayer invests his/her income.
Salaried individuals can claim a deduction called the standard deduction. A certain amount can be claimed by pensioners and salaried individuals without making any investment. The standard deduction that can be claimed by salaried individuals is Rs.50,000. Earlier, the standard deduction was Rs.40,000.
Interim Budget 2019
As per the Interim Budget that was announced on 1 February 2019, various tax benefits were provided to salaried individuals. In the Budget, the standard deduction was increased from Rs.40,000 to Rs.50,000. The increase in the standard deduction ensures that lesser tax is levied. An example of how standard deduction effects the net salary is mentioned below:
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Taxpayers who Receive Pension
The standard deduction for taxpayers who are receiving pension has been increased to Rs.50,000 from Financial Year 2019-2020. Earlier, the standard deduction was Rs.40,000.
New Tax Regime – Standard Deduction
As per Budget 2020, a new tax regime was introduced. As per the new income tax slabs, exemptions and deductions are not allowed. Therefore, standard deduction is not allowed under the new regime. However, taxpayers have the option to choose between the old regime and the new regime.