Rs 40,000 Standard Deduction Introduced: How It Impacts Your Income Tax
In Budget 2018, Finance Minister Arun Jaitley has made a standard cut of Rs 40,000 for the salaried class. This additional deduction has been proposed in lieu of current deduction of Rs 15,000 for medical reimbursement and Rs 19,200 for transport allowance. The Finance Minister said that this step will benefit 2.5 million salaried employees and pensioners, who generally do not enjoy any allowance for transportation and medical expenditure. The cost of revenue for the government will be around 8,000 crores, Jaitley said. However, the finance minister raised 3% to 4% cess on income tax for individual taxpayers.
What is standard deduction?
The standard deduction allows the deduction from the income of any salaried person to the expense of expenses incurred in connection with himself or his employment. There is no proof to claim standard deduction. Standard deduction for salaried individuals was first available, unless it was terminated from the assessment year 2006-07. The standard deduction, which was in existence till the year 2005-06, has been paid by salaried persons to Rs. 30 lakh rupees or 40 percent salary, whichever is less, the gross salary is below Rs 5 lakhs. If the gross salary is Rs. 5 lakh rupees, a standard deduction of 20,000 was allowed.
How will standard deductions affect your income tax?
As the standard deduction will be done according to medical reimbursement and transport allowances, the net increase in deduction will be Rs. 5,800, with the help of salaried person to save up to 30% tax bracket, 1800 rupees in case of income tax payment.
However, for the different taxpayers, increase of 3% to 4% in the cess eliminates some of the benefits derived from the start of the standard deduction.
"The standard deduction is restarted but withdrawing the exemption for vehicle allowance (Rs.19,200 per annum) and medical reimbursement (Rs.15,000) does not save much in the hands of the salaried class.In addition, an additional 1% cess This will further reduce savings and result in higher taxes for people in high tax brackets. Sandeep Sehgal's tax and regulatory director Ashok Maheshwari and Associates LLP Hanna is, therefore, not in a way, there is no relief for the salaried people at the front.
Benefits from standard deductions depend on the tax bracket, which comes in a salaried person
It is that these tax changes will affect your tax liability in 2018-19 (Assessment Year 2019-20), if you are an employee with less than 60 years of pay scale.
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