What is a Standard Deduction?
In India, the standard deduction was first used in 1974. And then ultimately abandoned. It was reinstated in the Union Budget of 2018. Both pensioners and those on salaries can presently make use of it. since it lowers their taxable income it helps individuals to reduce their tax burden and save some bucks.
Only people who chose the previous tax system were eligible for the standard deduction. however, starting with the current fiscal year (FY 2023–24). These benefits are also available to anyone who chose the new tax system. which was put into place in 2020.
What Will Be The Standard Deduction In FY 2022–23?
All salaried people and retirees in India are eligible for the standard deduction. The amount of standard deduction is Rs 50,000 or the amount of the paycheck, whichever is less. Doesn’t matter the individual’s income level more or less, they are eligible for this deduction.
Who is Eligible to Claim Rs. 50,000 Standard Deduction?
Those who get a salary or pension from the government, a commercial firm, or another employer are eligible to claim a standard deduction of Rs 50,000. It’s vital to remember that the standard deduction was only accessible to people who chose the previous tax system; starting with the financial year 2022–23, it will also be available under the new system.
Which Person is Not Qualified for the Standard Deduction?
The standard deduction is only available for salaried employees and pensioners of the Government and private sector. This does not apply to self-employed persons such as freelancers. However, the government has other tax benefits for them. There are some conditions where the senior citizen and individuals can avail and cannot claim the standard deduction.
When Senior Citizens Can Avail the Standard Deduction
Section 16 (ia) includes individuals, with salaried employees and pensioners, which concludes that senior citizens are also liable to avail of the deduction, given that it is earning pension or salary income.
“In the financial year 2018-2019, when the standard deduction was first introduced, there was ambiguity around the eligibility of standard deduction for pensioners, as it was applicable for taxable income under the head ‘salary’. The income tax department issued a clarification shortly later saying that pension is also taxable under the head ‘salary’, and hence, pensioners can also avail the benefit of the standard deduction,”
According to the income tax act, a person whose age falls between 60-80 years is said to be a senior citizen. A person over 80 years of age is called a ‘very senior citizen’.
Instead of medical and transport allowances, this standard deduction was initiated. An assessee was needed to provide proof of medical and transport bills. But now disregard that the deduction is present if the assessee has acquired these expenses or not. There is no need to submit tax proof.
Condition for Senior Citizens When They Can’t Avail Standard Deduction
In the event, the senior citizen does not have a pension or salary income, then he will be unable to avail of the deduction as given in the provision. For an instance, a senior citizen has placed his or her retirement collection in a bank as a fixed deposit (FD) and the reference of the income is interest received on this Fixed deposit. the standard deduction cannot be availed by the person for the mentioned event. This deduction is for senior citizens who have a fixed income and are getting it from a particular source.
Anand comments that “If a senior citizen does not have any salary income and is solely having an income from interest on FDs or rent etc, then the standard deduction cannot be availed,”. The income from the fixed deposit or rent is entitled as another income for the provision of income tax and thus a standard deviation is not present on this income.
Beneath section 80TTB the senior citizens who are earning an income from interest can claim Rs 50000, but for the individual assessee, there is a threshold of Rs 10000. When submitting your income tax return. you can use the standard deduction (ITR). In addition, it is always a good idea to seek the advice of a tax professional. Also, look at the official income tax website for any specific or up-to-date information.
