Budget 2019: Standard deduction gift for salaried employees from Modi govt Decoded! Claim Rs 50,000 benefit; pensioners benefit too, calculate now
Every employees is liable to pay taxes on their income, and hence such deduction reduces the amount a taxpayer pays to Income Tax Department.
Budget 2019 once again had some great news for taxpayers in terms of standard deduction. This time, the threshold limit has been extended to Rs 50,000. It was in Budget 2018, when the limit under this benefit was increased to Rs 40,000. This move comes in line with experts expectations. With Rs 50,000 deduction, both pensioners and salaried employee will save big on the income tax returns that they file.
Interim Finance Minister Piyush Goyal said, "Standard deduction increased to Rs 50,000 from Rs 40,000. TDS threshold on interest on bank and post office deposits raised from 10,000 to 40,000 rupees. Income tax will be levied on second self-occupied house."
CARE Rating stated that this will provide relief to salaried class.
A standard deduction is a fixed amount which can be deducted by a salaried employees from their gross salary. Now, they will deduct Rs 50,000 and not Rs 40,000. Every employees is liable to pay taxes on their income, and hence such deduction reduces the amount a taxpayer pays to Income Tax Department.
In the previous Budget 2018, it was also proposed that standard deduction would replace the existing transport allowance of Rs 1600 per month and medical allowance of Rs 15,000 per annum. According to ClearTax report, they are usually deducted from the gross salary and claimed as an exemption. Hence, an amendments to Section 17(2)(viii) of the Income-tax Act, 1961, was proposed.
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Here's how you will save big on income tax due to standard deduction at Rs 50,000.
Let's suppose in FY17, your gross salary stood at Rs 5 lakh, along with travel allowance of Rs 19,200 per annum and medical allowance of Rs 15,000 - then after deducting these allowances you net salary up to Rs 4,65,800 (Rs 5 lakh - Rs 19,200 - Rs 15,000) will be taxable.
Now from fiscal FY20, if your gross salary is Rs 5 lakh, and considering there is no travel allowance and medical allowances - then your net salary of Rs 4.50 lakh (standard deduction of Rs 50,000 from Rs 5 lakh) will be taxable.
This helps a taxpayer save about Rs 15,800 of taxes. Hence, this is one major ache-din for taxpayers.
Recently, the Income Tax department also clarified that taxpayers who received pension from their former employer, then that is taxable under the head ‘Salaries’. Hence, even pensioners can enjoy this new standard deduction.
Goyal says, "This will provide additional tax benefit of Rs. 4,700 crore to more than 3 crore salary earners and pensioners."
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