A standard deduction is essentially a tax deduction that is permitted regardless of the investment or expenditure that the individual has undertaken. This form of income tax standard deduction is permitted at a standard rate. Thus, no disclosures, investment proofs, or expense bills are necessary.
There are two types of standard deductions in India, which are described here.
- Standard Deduction from Rent @ 30% of the Rental Income
- Standard Deduction from Salary INR 50,000 from Salary Income
Standard Deduction from Rent
Under the heading “Income from House Property,” the rental income is categorised. To arrive at the Net Annual Value, a person generating rental income is first permitted to deduct the Municipal and other taxes paid to the Local Authority. The Net Annual Value may also be reduced further under Section 24. Below is an explanation of this:
| Sl. No. | Particulars | Amount |
| 1 | Gross Annual Value i.e., Actual Rent or Expected Rent – whichever is higher | XXX |
| 2 | (Less) Municipal and other taxes paid to Local Authority | (XXX) |
| 3 | (=) NAV or Net Annual Value | XXX |
| 4 | (Less) Deduction under section 24 | |
| a. Standard Deduction @ 30% | (XXX) | |
| b. Deduction for Interest on Loan | (XXX) | |
| 5 | (=) Income chargeable under the head Income from House Property | XXX |
The standard deduction for rental income is available regardless of the actual costs associated with the property. This Standard Deduction covers all costs incurred for maintaining the property in good condition, such as maintenance and repairs. It is not necessary to keep track of evidence of the actual costs expended.
This standard deduction of 30% may be claimed from all properties if a person receives rent from numerous residences. It is crucial to highlight here that this Standard Deduction is only allowed from Rent earned by renting of an apartment/building and not from Rent received from renting of unoccupied land.
Standard Deduction for Salaried Individuals
The Income Tax Act gives a variety of mechanisms for residents to claim deductions and refunds in addition to measures for taxing individuals’ income. Based on how people use their money, deductions are permitted.
The standard deduction is one of the deductions available to those who receive a salary. You should be aware that retirees and those who get a salary can automatically claim a certain amount under the standard deduction without the taxpayers having to invest or spend any money. After being removed for a while, the clause was reinstated in 2018 as part of the Budget announcement.
Here is all the information you need to know about the standard deduction for salaried people.
Standard Deduction – Union Budget of 2018
The salaried class has reason to celebrate thanks to the introduction of the Standard Deduction of INR 40,000 by Finance Minister Jaitley in the 2018 budget. It took the place of the annual medical reimbursement of INR 15,000 and the transport allowance of INR 19,200. It’s interesting to note that the Standard Deduction provision was previously available. In contrast, it was eliminated by the Finance Act of 2005. Standard deductions are typically taken out of gross salaries and claimed as exemptions. No matter their category or the requirement for an investment, all salaried employees are eligible to claim this deduction.
Standard Deduction – Interim Budget of 2019
Numerous tax perks for salaried workers and the middle class were included in the interim budget that was unveiled on February 1st, 2019. A notable change among them is the addition of INR 10,000 (up from INR 40,000) to the Standard Deduction. Taxpayers would benefit greatly from the Standard Deduction’s current value of INR 50,000 (no modification was made in Budget 2020 and 2021).
Taxpayers who are receiving Pension
According to a new explanation from the income tax department, pension payments made by a taxpayer to a former employer are taxable under the heading “Salaries.” As a result, the taxpayer may claim a standard deduction of INR 40,000* or, if it is less, the amount of their pension.
This was increased to INR 50,000 by the Interim Budget 2019 since FY 2019–2020 (AY 2020–21).
Final Take
All things considered, even while this modification may seem to have little effect on those who earn a salary, businesses stand to benefit since they will no longer have to expend a significant amount of administrative time processing their workers’ medical bills. Maybe it was what the lawmakers had in mind.
Standard Deduction under New Tax Regime
New tax laws were established in Budget 2020. Major deductions and exemptions are not permitted under the new regime; however, taxpayers do have the option of paying concessional tax rates. If the taxpayer is required to file a return under the new tax system, the standard deduction from salary income is also not permitted.
| Sl. No. | Particulars | Old Tax Regime | New Tax Regime |
| 1 | Salary Income | 5,00,000 | 5,00,000 |
| 2 | Standard Deduction | (50,000) | N. A |
| 3 | Taxable Salary | 4,50,000 | 5,00,000 |
Computation of Standard Deduction in case of Employee having Multiple Employer
The standard deduction is a fixed amount that is deducted from the employee’s overall compensation for that given fiscal year. It is independent of how many jobs the employee has changed. As a result, there is only one flat deduction allowed for the total compensation earned from all companies. The standard deduction for FY 2020–2021 would continue at INR 50,000.
Other Deductions Allowed under Income Tax
There are several more deductions that are permitted in addition to the Standard Deduction of 30% that was previously discussed. While the majority of these deductions are open to everyone, including salaried employees, some of them are only available to those who are paid a salary.
The deduction for entertainment expenses and the deduction for professional taxes are only applicable to salaried employees. Salary employees have access to a number of exemptions in addition to these deductions.
