Good and Bad News to the all Salaried persons the Standard Deduction of Rs.40,000 in 2018, Income Tax Benefits by the Finance Budget 2018-19
Medical and Transportation Allowances Subsumed into Standard Deduction
Standard Deduction: Budget 2018 has not cheered the Salaried Class at all, neither the tax slab is changed nor the deduction limit under section 80C is hiked. The tax rebate of Rs.5,000 has been reduced to Rs.2,500 and that too up to the taxable income of Rs.3,00,000 which was earlier up to Rs.5,00,000.
The only changed proposed for the salaried class is the reintroduction of Standard Deduction of Rs.40,000. This standard deduction was the part of income tax act but was done away with in Union Budget 2005-06 by P. Chidambaram by introducing medical and transportation allowances, but now from Assessment Year 2019-20, both medical allowances and transportation allowance are subsumed into the standard deduction of Rs.40,000.
All about Standard Deduction
- Standard Deduction allows a flat deduction of a specified amount (i.e. Rs.40,000) from income of salaried taxpayers towards expenses incurred during the course of employment. Say for example if your salary is Rs.5.20 lakh than you can start calculating tax by deducting Rs.40,000 straight away i.e. start with Rs.4.80 lakh.
- Standard Deduction is reintroduced by abolishing medical reimbursements and transport allowance, enhancing a deduction by just Rs.5,800 which would in turn saves tax of mere Rs.290 for the person falling in lowest tax bracket of 5%, Rs.1,160 for person falling in tax bracket of 20% and Rs.1,740 for the person falling in highest tax bracket of 30%. But the same savings of tax is nullified due to the increase in cess by 3% to 4%.
Income Tax Slab for the Financial Year 2018-19&Ass Year 2019-20 as given below:-
- Unlike Medical Reimbursements and Transport Allowances, No proof or any type of documents are needed to claim the standard deduction of Rs.40,000.
- Since pension is taxable under the head of salaries, any pension received by a person from his past employer shall be entitled to claim a standard deduction of Rs.40,000 or pension amount, whichever is lower under section 16 of the Income Tax Act.
- Please note that No standard deduction of Rs.40,000 is allowed in case of family pension received by the legal heirs of the deceased. The Family Pension is taxed under the head of income from other sources and a standard deduction of Rs.15,000 or 1/3rdof uncommitted pension received, whichever is lower, shall be exempt.