Standard Deduction FY 2018-19 AY 2019-20

Standard DeductionStandard Deduction is back again from fy 2018-19 as proposed in budget 2018.

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.

How ?…

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.

Hence 15,000-2500=12,500.

Health education cess of rs 4% of 12,500 is rs 500.

Add rs 500 to 12500.Thus total tax becomes rs 13,000.

Conclusion

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.

Kuldeep Singh
 

is a professional blogger,teacher and income tax expert

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