What is Standard Deduction?
Along with all the taxes imposed under the Income Tax Act, the provision also helps taxpayers with several ways through which one can claim deduction and rebate on the taxable income.
The standard deduction is designed to reduce taxable income, making it easier for taxpayers to lower their overall tax bill. It provides a basic level of tax relief and simplifies the tax filing process by allowing taxpayers to take a deduction without having to detail and prove each expense.
As per the 2024 budget, the standard deduction under the new regime is Rs. 75,000. However, there are no changes in standard deduction under the old regime. Any salaried employee under the old regime is eligible for a standard deduction of Rs. 50,000.
Also Read: New vs. Old Tax System
Purpose of Standard Deduction
- Simplifies Tax Filing: Provides a flat deduction amount, eliminating the need to itemize individual expenses.
- Reduces Taxable Income: Lowers the amount of income subject to tax, thus reducing overall tax liability.
- Provides Basic Relief: Offers a standard level of tax relief to all eligible taxpayers, regardless of their specific expenses.
- Streamlines Calculation: Eases the tax calculation process for salaried and pensioned individuals by offering a straightforward deduction.
- Encourages Compliance: Simplifies tax reporting, making it easier for taxpayers to comply with tax regulations.
Standard Deduction for Pensioners
If any individual receives income in the form of pension from former employer, that income is eligible for taxation under “Income from Salaries”. A standard deduction can be claimed of Rs. 50,000 or the sum total amount of pension, whichever is lesser.
In conclusion, It’s a straightforward way for taxpayers to reduce their taxable income without having to itemize deductions. The taxpayers do not need any additional documents for standard deduction.
The salaried individuals and pensioners can directly claim for a certain amount under the standard deduction by default. No investment or spending of money needs to be done for the same.
