Standard Deduction for Salaried Employees

The standard deduction is an important tax benefit available to salaried employees and pensioners, helping them reduce their taxable income without requiring any specific investments or proof of expenses. Unlike other deductions that depend on spending patterns or investments, the standard deduction is a fixed amount that eligible taxpayers can claim automatically.

This deduction was available in earlier years but was later removed. However, recognizing its importance in providing tax relief, the government reintroduced it in the Union Budget 2018. Over the years, the deduction has been revised to offer better benefits to taxpayers, making it a crucial component of income tax calculations.

What is Standard Deduction?

The standard deduction is a flat deduction allowed to salaried individuals and pensioners from their total income before calculating taxable income. It replaced the earlier transport allowance and medical reimbursement benefits, which required proof of expenses.

The standard deduction is a tax benefit available under both the old and new tax regimes. In the 2024 Budget, the government increased the deduction amount for individuals opting for the new tax regime.

Here’s how the deduction compares:

• Under the Old Tax Regime: ₹50,000
• Under the New Tax Regime: ₹75,000

This revision provides additional tax relief to salaried individuals and pensioners, making the new tax regime a more attractive option for taxpayers.

Who Can Claim Standard Deduction?

The following individuals can avail of the standard deduction:

• Salaried Employees: Any individual receiving a salary from an employer can claim a flat ₹50,000 deduction from their salary.
• Pensioners: Retired individuals receiving a pension (which is taxable under 'Income from Salary') can also claim the deduction.
• Family Pensioners: Individuals receiving a pension after the death of a government employee can claim ₹15,000 or one-third of the pension (whichever is lower).

Essential Documents for Tax Filing and Standard Deduction

The standard deduction on salary income does not require any specific documentation, as it is automatically applied. However, to ensure a smooth income tax return (ITR) filing process, you should keep the following financial documents ready:

• Bank statements for tracking income and transactions.
• Income records from interest earned on savings or fixed deposits.
• TDS certificates issued by employers or financial institutions.
• Investment proofs (if applicable under the old tax regime).
• Form 26AS and AIS to cross-check tax deductions and income details.

Why is Standard Deduction Important?

Reduces Taxable Income: A fixed ₹50,000 deduction lowers your taxable salary or pension.

No Proof or Documentation Needed: Unlike medical bills or transport allowance, standard deduction is automatic.

Available to All Salaried Individuals and Pensioners: Ensures fair tax relief for employees and retirees.

Simplifies Tax Filing: No need to maintain separate expense records.

Conclusion

The standard deduction is a simple yet effective way to reduce tax liability for salaried individuals and pensioners. With ₹50,000 automatically deducted from taxable income, it provides a direct benefit without any additional paperwork. Whether you opt for the old or new tax regime, this deduction remains applicable to all salaried individuals.

1. Is the standard deduction available for self-employed individuals?

No, self-employed professionals and business owners cannot claim this deduction. It is only for salaried employees and pensioners.

2. Does the standard deduction require proof?

No, it is an automatic deduction, and you don’t need to submit any documents.

3. Can I claim both HRA and the standard deduction?

Yes, under the old tax regime, you can claim both HRA (House Rent Allowance) and the standard deduction.

4. Is standard deduction applicable to part-time employees?

Yes, as long as you are receiving a salary and filing ITR under the Income from Salary head, you can claim the standard deduction.

5. Can Freelancers Claim the Standard Deduction?

No, freelancers cannot claim the standard deduction. This deduction is exclusively available for individuals earning a salary or pension.