The standard deduction for salaried persons/pensioners. Calculation of taxable income for an
individual involves a calculation of total income.
The total income under different headings of income is the total income. You can reduce the total income by various deductions and allowances to get the final taxable income.
These discounts can be deducted
under 80C, 80D or standard deductions on salary or income from home property.
Net income after such deduction is subject to tax as per the relevant slab rate
applicable to the taxpayer.
The standard deduction on pay was first introduced in 1974. But the government abolished it in 2005. The government reintroduced it in the 2018 Union Budget.
This includes increasing the
standard deduction benefit for F.Y 2021-22. Before discussing the benefits,
let's understand what is standard deduction.
The standard deduction under income from salary.
You can also, like-
Automated Income Tax Preparation Excel Based Software All in One for the Non-Govt(Private) Employees for the F.Y.2021-22]
The Net Salary is the total
wage, pension, gratuity, grant, commission minus any deduction under the Income
Tax Act. Under Section 10 includes allowances such as house rent and transportation
.
The government has re-introduced the standard deduction from the assessment year 2019-20. Earlier, the government had waived a transport allowance of Rs 19,200 and a medical allowance of Rs 15,000.
In the assessment year, 2019-20
salaried individuals can deduct the equivalent amount of Rs 40,000. However,
they could no longer deduct transportation and medical allowances.
From A.Y 2020-21, a standard
discount of Rs 50,000 is available for all salaried persons. Any medical and
travel allowance is not yet applicable.
Remember that the standard deduction for salary cannot exceed the amount of salary under any circumstances. In other words, the maximum discount you can get under 16(ia) is less than Rs 50,000 or salary.
You can also, like-
Automated Income Tax Preparation Excel Based Software All in One for the Government and Non-Government (Private) Employees for the F.Y.2021-22]
Old vs. new tax system
The standard deduction discussed
above is only for taxpayers who have opted for the old or regular tax system.
Budget 2020 has introduced a new
income tax system for salaried taxpayers in the country. It provides relief to
the salaried class from the burden of lockdowns, job losses and low incomes.
But, they cannot take the standard deduction, professional tax deduction and
entertainment allowance on salary.
If a person opts for the new taxsystem, they will not be able to deduct the salary standard of Rs 50,000. They cannot deduct interest under section 80C of Rs 150,000 and interest on the self-occupied property up to Rs 200,000.
At the time of filing the return, every salaried person has the option to choose between the old and the new tax system. You can change the option every year. However, they cannot do the same in a financial year, only at the time of filing the return.
• Also, the employee must notify his employer of any changes in the tax system of his choice.
You can also, like-
Automated Income Tax Preparation Excel Based Software All in One for the
How is the standard deduction shown in the income tax return?
ITR-1 has already been filled with
the details of the individual taxpayer such as his name, PAN, Aadhaar number
etc.
Goss total salary
Net Salary (Total Salary -
Allowance under Section 10)
Reduction under Section 16
Once a person enters the details of total salary and exemption under section 10, the ITR form automatically calculates the net salary.
You can verify all the information online through Part B of Form 16. The employee can get Form 16 from the employer. It shows the TDS deducted from the employee's salary income in the financial year.
Form 16 or TDS Certificate provides
similar information in a format similar to ITR-1. An individual can use it to
fill his ITR-1. Any discount or allowance, if applicable to an individual, will
be reflected in Form 16.
You can also, like-
Automated Income Tax Preparation Excel Based Software All in One for the
Deductions are made from income
through a discount of U /s 16 which is taxable under the heading “Salary”.
Inactivity in U / s16 (a) includes
the following:
The standard deduction under
Section 16 (IA)
Entertainment allowance (allowance
paid by the government to their employees)
Professional tax (you can claim
exemption on any tax paid to the government)
After entering all the information in the form ITR-1, the form automatically calculates the final tax amount. To ensure the accuracy of the quantity, a person can always do the same test through Form 16. In other words, there should be similarities to ensure the validity of both forms.
In cases where no exemption is
available on Form 1 does and the employee is eligible, he does not need to
worry. In such cases, an employee may provide details of deductions applicable
to him at the time of filing the return. The online form has a drop-down menu.
The taxpayer can choose the allowances applicable to him.
Conclusion
We hope this article has helped you
understand what standard deduction is in