Standard Deduction FY 2018-19 AY 2019-20
All tax payers whose income comes under head “salaries”, can avail rs 40,000 flat standard deduction from gross salary.
Earlier, tax payers used to avail it until AY 2006-07.
What is Standard Deduction
It is an overall tax deduction of rs 40,000 for all tax payers.
All tax payers means salaried persons,pensioners.
who can not avail standard deduction
- If income comes under business,profession.
- income earned from capital gains.
- If income is from house properties.
It is also important to note that only salary class and pensioners senior citizens can avail Standard Deduction.
How much tax benefit for salaried class
Tax payers who are deriving income from salary,has less tax benefit from standard deduction.
As you know govt. has discontinued transport allowance of rs 1600 per month (total rs 19200).
Similarly tax payers are deprived of medical allowance of rs 15,000 (rs 1250 per month).
The total tax benefit of rs 34,200 is no more for them.
If we deduct rs 40,000 from rs 34,200,it becomes only rs 5800.
Thus if you were availing medical and conveyance benefits,you have little to enjoy tax rebate.
Tax benefit for senior class
Budget 2018 has proved to be a boon for senior citizens .
As far as Standard Deduction for senior citizens,they will get full rs 40,000 deduction.
As you know senior citizens have not the facility of medical reimbursement and conveyance benefits.
If pensioner passes away
In case pensioner passes away and his/her legal heirs are getting commuted pension,in this case you are not elligible for standard deduction .
Because income from family pension(in such case) is taxed under the head “income from other sources”.
How to calculate
Suppose your salary/pension is rs 5 lakhs.
And deduct rs 40,000 from rs 5,00,000.
It becomes rs 4,60,000.
So also let your savings under section 80C
are rs 150,000.
Thus your taxable income is 460,000-150,000=310,000.
Now upto first rs 250,000,there will have no tax.So 310,000-250,000=60,000.
Hence 5% of 60,000 is rs 15,000
Now under section 87A,you are elligible for rs 2500 rebate.
Health education cess of rs 4% of 12,500 is rs 500.
Add rs 500 to 12500.Thus total tax becomes rs 13,000.
In the end we can say senior citizens will get much more benefit out of Standard Deduction as compared to salary persons who are currently getting benefits of travelling and medical allowances.