What is Standard Deduction for Salaried Employees

One of the important changes in Budget 2018 was the re-introduction of Standard Deduction for income tax calculation. What is the standard deduction limit, your eligibility, standard deduction in new tax regime, impact on salaried employees and pensioners and how it is useful in income tax calculation? We will answer all these questions in this article.

Standard Deduction is a flat deduction available to salaried employees and pensioners. This helps to reduce taxable income while calculating income tax with Old Tax Regime. For example, if your gross income is Rs. 6 Lacs from salary, standard deduction of Rs. 50,000 will be applicable, due to which your taxable income will become Rs. 5.5 Lacs on which income tax will be calculated. Hence this helps in saving your income tax!

Budget 2023 Update:

Standard Deduction of Rs. 50,000 is now available in new tax regime from FY 2023-24. In Budget 2023, the benefit of standard deduction was extended to new tax regime and will now be available in both tax regimes for FY 2023-24. This is a welcome move for salaried employees and pensioners. Businessman will still not get this benefit of standard deduction in any regime.

More information about Standard Deduction in New Tax Regime here.

ALSO READ: Download Income Tax Calculator for FY 2023-24 in Excel

Standard Deduction Introduction – Budget 2018

Standard Deduction was introduced in Budget 2018 with limit of Rs. 40,000 for FY 2019-20. This was introduced to replace two existing components:

Transport Allowance of Rs. 19,200
Medical Reimbursement of Rs. 15,000

This helped salaried employees and pensioners save their income tax even if they were not claiming above mentioned components during income tax calculation.

ALSO READ: New Tax Regime Benefits

Standard Deduction – Budget 2019

In Interim Budget 2019, the deduction limit was increased to Rs. 50,000, thus giving more joy to salaried employees and pensioners. This helped in saving more income tax!

What is the standard deduction 2023?

Currently the standard deduction limit is Rs. 50,000 for FY 2023-24 and is applicable to both Salaried employees and pensioners. Only Businesses won’t get the chance to claim this flat deduction for income tax calculation purpose.

From FY 2023-24, standard deduction of Rs. 50,000 will be available to old and new tax regimes as per the rule in Budget 2023.

Who are eligible for standard deduction?

Salaried employees and pensioners above 60 years of age can claim this Deduction while calculating income tax.

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Is Standard Deduction available in both Tax Regime?

From FY 2023-24 standard deduction of Rs. 50,000 will be available in both Tax Regimes for salaried and pensioners. No other deductions are available in New Tax Regime. So if you opt for New Tax Regime, you will get this Standard Deduction of Rs. 50,000 only.

Standard Deduction Calculation Examples

Let’s say for example your gross salary is Rs. 6,00,000. Below is the calculation of your Taxable income in FY 2023-24:

Particulars	Old Tax Regime	New Tax Regime
Gross Salary	Rs. 6,00,000	Rs. 6,00,000
Standard Deduction	– Rs. 50,000	– Rs. 50,000
Taxable Income	Rs. 5,50,000	Rs. 5,50,000

Standard Deduction Calculation Example FY 2023-24

Let’s say for example your gross salary is Rs. 6,00,000. Below is the calculation of your Taxable income in FY 2022-23:

Particulars	Old Tax Regime	New Tax Regime
Gross Salary	Rs. 6,00,000	Rs. 6,00,000
Standard Deduction	– Rs. 50,000	Not applicable
Taxable Income	Rs. 5,50,000	Rs. 6,00,000

Standard Deduction Calculation Example FY 2022-23

ALSO READ: Income Tax Calculation Examples

Which is Better Old or New Tax Regime?

There is no best option for an individual. It depends of your own income and investments you make while selecting Old Tax Regime.

If you are selecting New tax regime than you need to check if making some investments can help you save income tax while keeping Old Tax Regime in mind. If you can save tax with Old tax regime and go for it else new tax regime can be selected.

Here’s the video on some calculations while selecting tax regime:

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Conclusion

Standard deduction is a good option to save income tax with Old Tax Regime. If you are salaried employee or pensioner than automatically this option gets enabled for you while filing ITR (Income Tax Return).

The only disadvantage is when you are opting for New Tax Regime, you won’t get to claim this deduction. So assess your options with income and investments while using this income tax calculator and help yourself save income tax!

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Income Tax Calculator App – FinCalC

For Income Tax Calculation on your mobile device, you can Download my Android App “FinCalC” which I have developed for you to make your income tax calculation easy.

What you can do with this mobile App?

Calculate Income Tax for new FY 2023-24 and previous FY 2022-23
Enter estimated Investments to check income tax with Old and New Tax Regime
Save income tax details and track regularly
Know how much to invest more to save income tax
More calculators including PPF, SIP returns, Savings account interest and lot more

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