The budget of 2019 has provided for standard deduction to salaried individuals for Rs 50000. Let's take a deeper look into what it really means for the salaried individuals.
The budget of 2019 has been announced, and the salaried class have something to rejoice about.
The FM has proposed to reintroduce the ’Standard Deduction’ of Rs 40,000.
What is a standard deduction?
It is a fixed amount of deduction – in this case, an amount of Rs 40,000 which can be reduced by salaried taxpayers, from their gross salary.
Interestingly, the provision of Standard Deduction was earlier available but was abolished in the Finance Act 2005.
It is also proposed that this deduction would replace the existing transport allowance of Rs 1600 per month and medical allowance of Rs 15,000 per annum. They are usually deducted from the gross salary and claimed as an exemption. The government has proposed requisite amendments to Section 17(2)(viii) of the Income-tax Act, 1961.
Resultantly, if the standard deduction of Rs 40,000 replaces medical allowance of Rs 15,000 and transport allowance of Rs 1600 per month i.e. 19,200 per annum, the effective additional benefit on account of the standard deduction would be an additional income exemption of Rs 5,800.