Standard Deduction of Rs 40,000 on income tax is the only thing to discuss after Budget 2018, for salaried employees. As there is no changes in income tax slab rates for FY 2018-19, now people are searching for other options to save income tax on their income and due to that the Rs 40,000 Standard Deduction attracts almost every salaried person.
So, what is Rs 40,000 Standard Deduction? Who are going to be benefited from this new Standard Deduction rule of Income tax? How to calculate & how much is the standard deduction for 2018-19 (AY 2019-2020)? Let me share more details about this topic as per my understanding.
What is Rs 40,000 standard deduction announced by FM Arun Jaitley in Budget 2018
Right now every salaried taxpayers can avail a tax benefit under conveyance & medical expenses. As per the current income tax slab rate, you are eligible for Rs 19,200 per annum under transport allowance and medical reimbursement (up to Rs 15,000 per annum)
But with the introduction of new standard deduction, these 2 categories exemption will be waived off and a direct rs 40,000 bracket is going to created.
Also Read About National Health Protection Scheme, proposed during Budget 2018.
Benefits of Standard Deduction of Rs 40,000 & How Much Tax One can save
The major benefit one can say that there will huge relief from documentation point of view. Earlier to get the 15,000 medical allowances for income tax exemption, one need to submit many medical bills, reports etc.
But as both the transport allowance & medical reimbursement is going to be replaced by Standard Deduction, it will simply save you from documentation, paperwork and make tax exemption very easy compared to previous process.
But if you ask how much actual benefit in terms of tax exemption, then that is very minimal. Simply deduct the combine amount of transport allowance & medical reimbursement from standard deduction and you will find that the taxable income of salaried individuals will be reduce by minimum Rs 5,800.
Standard Deduction for Pensioners To Get Maximum Benefit
Now, this is a very good move for pensioners in India. By default they don’t have any of the allowances when they draw pension. But as this standard deduction is applicable for them as well, that means a clear cut extra Rs 40,000 every pensioners are going to get from next Fy 2018-19.
As an individual taxpayer, the benefit will be simply as it was. Means, if you are under 5% tax bracket, then definitely you are going to get more benefit. When for a 30% tax payer, this deduction may not help in significant way to save more tax in their income.
So, if you have any doubt regarding Standard Deduction, then you can write a comment below. You can also share your experiences or knowledge about Standard Deduction to make this information worthy for our readers.