Standard Deduction to Salaried Persons in Budget 2018, With Automated 100 employees Form 16 Part A&B For F.Y. 2018-19

This Deduction was introduced in the budget of 2018. Because of this deduction, the people who earn a monthly salary can claim a fixed deduction of Rs.40 thousand from their total income. It results in the reduction of tax liability. Because of this deduction, the income tax can reduce up to Rs.12,000.

What is a Standard Deduction For Salaried

The standard deduction is a way to give extra tax benefit only to the salaried people. It is a fixed deduction of Rs.40,000 irrespective of income, expense or investment. To avail this deduction you are not required to submit any receipt or investment proofs.

An Employee gets a standard deduction for the unaccounted expense linked to the job. You would agree that there are many job-related expenses for which you can’t produce the receipt. While a businessman has many ways to claim his expenses. So the government has made this provision to give relief to the employee.

From the FY 2018-19, Every Employee can claim the standard deduction of Rs.40,000. I mean that you must deduct this amount from the taxable income. After this deduction and other applicable deduction, you should calculate the income tax on the basis of income tax slab.

The government employees must include this deduction while e-filing income tax return. As many of them were not getting conveyance and medical allowances. So this deduction would benefit them most.

However, for those employees who are availing the full medical allowance and Conveyance Allowance, the benefit is small. For them, the taxable salary would reduce by Rs.5,800 because of the standard deduction.

Particulars Until FY 2017-18 From FY 2018-19
Gross Salary (in Rs.) 4,00, 000 4,00,000
(-) Transport Allowance 19,200 Not Applicable
(-) Medical Allowance 15,000 Not Applicable
(-) Standard Deduction Not Applicable 40,000
Net Salary 3,65,800 3,60,000

Download Automated Income Tax Form 16 Part A&B for the Financial Year 2018-19 & Ass Year 2019-20 [ This Excel Utility can prepare at a time 100 Employees Form 16 Part A&B] ( Who are not able to download Form 16 Part A, they can use this Format)

Standard Deduction and e-filing

From the Assessment year 2019-20 (FY 2018-19), there would be a small change in the ITR form. In the ITR-1, there would be a standard deduction of Rs.40,000 for everyone. This deduction would be in-built in the form. Hence, your gross salary would be reduced by Rs.40,000. You would see this row. It would not be editable. Therefore, if an employer did not factor in this deduction, the income tax return would provide the refund.

However, for the other ITR forms, this deduction would be applied if you choose yourself as the salaried individual.

Standard Deduction on Pension

There was a confusion that whether this standard deduction of Rs.40,000 would be applicable to pensioners as well. As they get pension instead of the salary. So, later the government has clarified that for tax purposes the pension is considered as the salary hence the pensioners would also enjoy the benefit of standard deductions.

Thus, the pensioners should be happier as they were not getting any allowance earlier. This standard deduction would give them the full benefit.

In this post, I have told you about the standard deduction which is the important component for income tax calculation. Besides this, you should also know about the income tax rebate, surcharge, and cess. These also play the crucial role in determining your tax liability.

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