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    Standard Deduction For Salaried Individuals: Maximize Your Tax Savings (80C)

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    Arjun Verma
    The document summarizes the standard deduction introduced in the Indian budget for fiscal year 2019-2020 for salaried individuals. The standard deduction of Rs. 40,000 replaces the existing transport allowance of Rs. 1,600 per month and medical allowance of Rs. 15,000 per year. This provides an additional tax exemption of Rs. 5,800 for salaried individuals. The standard deduction lowers taxable income and simplifies tax compliance for employers by removing the need to process reimbursements for employees.

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    Standard Deduction For Salaried Individuals: Maximize Your Tax Savings (80C)

    Uploaded by

    Arjun Verma
    49 views4 pages
    The document summarizes the standard deduction introduced in the Indian budget for fiscal year 2019-2020 for salaried individuals. The standard deduction of Rs. 40,000 replaces the existing transport allowance of Rs. 1,600 per month and medical allowance of Rs. 15,000 per year. This provides an additional tax exemption of Rs. 5,800 for salaried individuals. The standard deduction lowers taxable income and simplifies tax compliance for employers by removing the need to process reimbursements for employees.

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    The document summarizes the standard deduction introduced in the Indian budget for fiscal year 2019-2020 for salaried individuals. The standard deduction of Rs. 40,000 replaces the existing transport allowance of Rs. 1,600 per month and medical allowance of Rs. 15,000 per year. This provides an additional tax exemption of Rs. 5,800 for salaried individuals. The standard deduction lowers taxable income and simplifies tax compliance for employers by removing the need to process reimbursements for employees.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    49 views4 pages

    Standard Deduction For Salaried Individuals: Maximize Your Tax Savings (80C)

    Uploaded by

    Arjun Verma
    The document summarizes the standard deduction introduced in the Indian budget for fiscal year 2019-2020 for salaried individuals. The standard deduction of Rs. 40,000 replaces the existing transport allowance of Rs. 1,600 per month and medical allowance of Rs. 15,000 per year. This provides an additional tax exemption of Rs. 5,800 for salaried individuals. The standard deduction lowers taxable income and simplifies tax compliance for employers by removing the need to process reimbursements for employees.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
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    29/01/2019 Standard Deductions for Salaried Individuals - Impacts on Income Tax

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    Standard Deduction for Salaried


    Individuals
    Updated on Jan 11, 2019 - 05:47:14 PM

    The Finance Minister, in Budget 2018, has not brought in the much-expected changes in tax slabs
    (https://cleartax.in/s/income-tax-slabs). Nor has he touched Section 80C (https://cleartax.in/s/80c-80-
    deductions/) with regard to raising the limits for the individual taxpayers. However, the salaried class still have
    something to rejoice about after the budget.

    He has proposed to reintroduce the ’Standard Deduction’ of Rs 40,000. What is a standard deduction? It is a
    fixed amount of deduction – in this case, an amount of Rs 40,000 which can be reduced by salaried taxpayers,
    from their gross salary. Interestingly, the provision of Standard Deduction was earlier available but was
    abolished in the Finance Act 2005. It is also proposed that this deduction would replace the existing transport
    allowance of Rs 1600 per month and medical allowance of Rs 15,000 per annum. They are usually deducted
    from the gross salary and claimed as an exemption. The government has proposed requisite amendments to
    Section 17(2)(viii) of the Income-tax Act, 1961.

    Resultantly, if the standard deduction of Rs 40,000 replaces medical allowance of Rs 15,000 and transport
    allowance of Rs 1600 per month i.e. 19,200 per annum, the effective additional benefit on account of the
    standard deduction would be an additional income exemption of Rs 5,800

    Let us understand this with a small example:


    Feedback
    Particulars Until AY 2018-19 From AY 2019-20

    Gross Salary (in Rs.) 5,00, 000 5,00,000




    (-) Transport Allowance 19,200 Not Applicable

    (-) Medical Allowance 15,000 Not Applicable

    (-) Standard Deduction Not Applicable 40,000

    Net Salary 4,65,800 4,60,000

    From the above, you may note that the taxable salary has come down on account of the standard deduction.

    Do you have any questions about tax or

    https://cleartax.in/s/standard-deduction-salary 1/4
    29/01/2019 Standard Deductions for Salaried Individuals - Impacts on Income Tax

    finance you need help with?


    Talk to our CA

    Taxpayers Receiving Pension


    In a recent clarification issued by the income tax department, if a taxpayer has received a pension from the
    former employer, it is taxable under the head ‘Salaries’. Therefore, the taxpayer shall be entitled to claim a
    standard deduction of Rs. 40,000 or the amount of pension, whichever is less.

    Our Take
    All said and done, though the impact of this amendment for the salaried may appear to be minimal, employers,
    with this move, would stand to gain in terms of being spared of a whole lot of administrative efforts in
    processing medical bills of its employees. Perhaps, that was the intention of the legislature!

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