The concept of standard deduction on salary is a crucial aspect of income tax calculations for salaried individuals. Introduced as a means to simplify tax filing and provide relief to employees, standard deduction allows salaried individuals to reduce their taxable income by a fixed amount, thus lowering their overall tax liability.
What is Standard Deduction?
The standard deduction is a fixed amount that taxpayers can subtract from their gross income to reduce their taxable income. It is available to salaried individuals and pensioners without requiring proof or documentation.
Standard Deduction under New & Old Tax Regime
The standard deduction available for salaried individuals under both the regimes for the FY 2024-25 (AY 2025-26) is as follows:
- Old Tax Regime: Rs. 50,000
- New Tax Regime: Rs. 75,000
Benefits of Standard Deduction
- Reduction of tax liability: The standard deduction is a flat deduction that helps in reducing the taxable income, resulting in reduction of tax liability.
- Simplification of ITR filing: There is no need to maintain any documents or proofs to claim standard deduction making it easier to file the income tax return while claiming standard deduction.
- No Conditions Attached: The standard deduction is available to all salaried individuals, without any conditions.
Purpose of Standard Deduction
- Simplify tax filing by reducing paperwork and enabling deductions regardless of actual expenses.
- Offer tax relief specifically to middle-class salaried individuals.
- Extend benefits to pensioners through the standard deduction.
Documents Required for Standard Deduction
- Bank statements for the relevant financial year.
- Income statements from interest or fixed deposits.
- TDS (Tax Deducted at Source) certificates.
- Investment documents.
- Form 26AS and Form AIS.
FAQs
What is the standard deduction on salary?
The standard deduction is a flat deduction of ₹75,000 under the new tax regime from your taxable salary income, aimed at reducing your overall tax liability.
Who is eligible for the standard deduction?
All salaried employees are eligible for the standard deduction, regardless of their salary amount or other deductions they may claim.
