Standard Deduction: What is standard deduction and who gets its benefit?

In this year's budget (Budget 2025), Finance Minister Nirmala Sitharaman has made a big announcement regarding income tax. She has made income up to Rs 12 lakh tax-free. At the same time, the standard deduction has been kept at Rs 75,000 only. A standard deduction is a deduction that is deducted from your income and after this tax is calculated on the remaining income. Understand who gets the benefit of this.
Who can avail of the benefit?
Salaried employees and pensioners get the facility of taking tax exemption through standard deduction. If you choose the new tax slab to pay income tax, then you will get the benefit of a standard deduction of Rs 75,000. On choosing the old tax regime, salaried taxpayers get only Rs 50,000 as a standard deduction.
Understand with an example.
Suppose you are a salaried person and your annual income is Rs 13 lakh and if you choose the new tax regime, then the standard deduction will be reduced by Rs 75,000. Now Rs 12,25,000 will be saved, tax will be levied on it according to the slab. On the other hand, if your income is Rs 12,75,000, then according to the new tax regime, you will not have to pay income tax because income up to Rs 12 lakh is tax-free and you will get the benefit of a standard deduction of Rs 75,000. If you choose the old tax regime on an annual income of Rs 13,00,000, then you will get the benefit of a standard deduction up to Rs 50,000 in the total package. In such a situation, your tax will be calculated at Rs 12,50000 instead of 13 lakhs.
Re-implemented in 2018 after 2005
Before the year 2005, there was a provision for standard deduction for salaried people in India, but it was discontinued in the budget of that year. Instead, a provision was made for a deduction of Rs 19,200 in the form of transport allowance and Rs 15,000 in the form of medical allowance for some special items. But the employees were not satisfied with this. The employees believed that businessmen and consultants claim exemptions by showing many types of expenses, but salaried people have very few options. To address this complaint of the employees, the government re-introduced standard deduction in the budget of 2018. However, the exemption in the form of transport allowance and medical reimbursement was abolished.
What is the benefit of standard deduction?
The standard deduction is better for employees than the exemption in the form of transport allowance and medical reimbursement because the paperwork used to increase to get the exemption of transport allowance and medical reimbursement. Whereas through standard deduction, the amount is deducted directly from the gross salary of the salaried and after this the taxable income is determined on the remaining salary.
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