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Standard Deduction On Salary For Employees

What Is Standard Deduction for Salaried Employees?

The standard deduction for salaried employees is a flat ₹50,000 from total income under the head salary.

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The main objectives for implementing the standard deduction are -

  • Reduce the paperwork
  • Allow income tax deduction irrespective of the actual spending.
  • To benefit pensioners from the income tax deduction.

It is usually deducted from your gross salary, and it can be claimed as an exemption irrespective of any further investment.

[Source]

The following table states an example of standard deduction under salary components.

Salary Components

Financial Year 2022-23

Gross Salary

₹ 10,00,000

Leave transport allowance

NA

Medical allowance

NA

Standard deduction

₹50,000

Net salary

₹9,50,000

What is Standard Deduction Limit on Salaried Employees in New vs Old Tax Regime?

The new tax regime is introduced in the budget of 2020, which allows concessional rates; however, there are no exemptions or standard deductions for salaried persons. The new regime has lower rates of income tax up to ₹15,00,000. 

You have the option to choose between old or new regimes while filing a return. Even pensioners can switch between these choices.

[Source 1]

[Source 2]

Income Slabs

Tax Rate (Old System)

Tax Rate (New System) Without Exemptions and Deductions

Up to ₹ 2.5 lakh

NIL

NIL

₹ 2.5-5 lakh

5%

5%

₹ 5-₹7.5 lakh

20%

10%

₹ 7.5-₹10 lakh

20%

15%

₹ 10-₹12.5 lakh

30%

20%

₹ 12.5-₹15 lakh

30%

25%

Above ₹ 15 lakh

30%

30%

According to the new regime, it is applicable if the taxpayer forgone deduction and exemptions under the following heads -

  • Standard deduction of ₹ 50,000.
  • Deduction under section 80C maximum up to ₹ 1,50,000.
  • Deduction under section 24 maximum up to ₹ 2,00,000.
  • Entertainment allowance and professional tax deduction under section 16(ii).
  • Leave travel allowance.
  • House rent allowance.
  • Premium of medical insurance between ₹ 25,000 to ₹ 50,000.
  • Interest in savings accounts under section 80TTA up to ₹ 10,000.
  • Interest on savings accounts for senior citizens under section 80TTB up to ₹ 50,000.

[Source 1]

[Source 2]

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Who Can and Cannot Claim Standard Deduction?

What Is the Threshold Limit of Standard Deduction?

As already mentioned, the maximum standard deduction salary limit is ₹50,000 or net salary amount, whichever is lower.

The table given below serves as an example.

Salary Components

Amount

Gross salary

₹ 3,50,000

HRA exemption

₹ 80,000

Leave travelling allowance exemption

₹ 1,10,000

Other exemption

₹ 1,30,000

Net salary

₹ 30,000

Here standard deduction will be ₹30,000 as it is lower than ₹50,000. Standard deduction on salary income is calculated on total income in a given fiscal year.

[Source 1]

[Source 2]

Documents Required for Standard Deduction on Salaried Employees

How to Claim Standard Deduction for Salaried Employees?

Frequently Asked Questions