Standard deduction for Salaried Individuals
Tax planning is an essential part of financial management for salaried individuals, and one of the most beneficial deductions available is the standard deduction. Introduced to simplify tax calculations and reduce the tax burden, the standard deduction is a flat amount subtracted from taxable income before applying tax rates.
In this blog, we will explore everything you need to know about standard deduction for salaried employees, including its applicability, calculation, and how it impacts your tax liability.
Standard Deduction Under Section 16
The deduction is available under Section 16 of the Income Tax Act, 1961, which allows salaried individuals and pensioners to claim a fixed deduction without the need for proof of expenses.
Applicable Standard Deduction for FY 2024-25 (AY 2025-26)
- Old Tax Regime: ₹50,000
- New Tax Regime: ₹75,000
Who Can Avail Standard Deduction?
The standard deduction is applicable to all salaried employees and pensioners without any conditions. Unlike other deductions, it does not require any specific expenses, investments, or supporting documents.
Key Benefits of Standard Deduction
- Reduction in Taxable Income
- The deduction directly lowers the salary under taxable head, thereby reducing the tax burden.
- Simplification of Tax Filing
- No need to submit any bills or proofs to claim this deduction.
- Available to Pensioners
- Unlike many other deductions, pensioners can also benefit under Section 16 exemption.
Comparison: Standard Deduction vs. Other Deductions
| Category | Standard Deduction | Other Deductions |
|---|---|---|
| Requirement | No proof required | Requires proof of expenses |
| Eligibility | Salaried employees & pensioners | Salaried individuals with specific investments |
| Maximum Limit | ₹50,000 (Old Tax Regime) / ₹75,000 (New Tax Regime) | Varies (e.g., ₹1.5 lakh under Section 80C) |
How to Claim Standard Deduction?
- Salaried individuals: The employer includes the standard deduction while calculating taxable salary.
- Pensioners: The deduction can be claimed while filing Income Tax Returns (ITR).
Learn more about taxation in our The Indian Tax System: What You Need to Know Blog
Conclusion
The standard deduction under salary head is a major relief for salaried individuals and pensioners, offering a straightforward way to reduce taxable income. It plays a significant role in tax planning, making the process easier and hassle-free.
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