Paying taxes can feel overwhelming, but one way to reduce your tax bill is by claiming standard deduction.
The standard deduction is a fixed amount that reduces the amount of your salary income that is taxable, which means you pay less tax.
The best part is that you don’t need to submit any receipts or proof of your expenses. It’s a simple and effective way to lower your taxes.
Let’s break it down in a way that’s easy to understand.
What is Standard Deduction?
In simple terms, standard deduction is a set amount of money that is automatically subtracted from your total salary income before taxes are calculated. This reduces the taxable income, meaning you pay less tax.
For example, if your salary is ₹8,00,000, and you claim a standard deduction of ₹50,000, your taxable salary would drop to ₹7,50,000.
The Latest Changes in Standard Deduction (Budget 2024 Update)
In Budget 2024, the Indian government made an important change to the standard deduction that will benefit many taxpayers.
Starting from the financial year 2024-25 (Assessment Year 2025-26), the standard deduction will increase from ₹50,000 to ₹75,000 for individuals under the new tax regime. This change will give salaried workers more tax relief.
For those receiving a family pension, the standard deduction will also increase—from ₹15,000 to ₹25,000.
Why Do We Have the Standard Deduction?
The standard deduction is designed to:
- Simplify the tax process: Instead of keeping track of all your individual expenses, you can just take this fixed amount off your salary.
- Provide relief to taxpayers: It reduces the taxable income, which ultimately lowers the tax burden, especially for middle-class salaried workers.
- Help pensioners: Senior citizens and pensioners also benefit from this deduction, making their financial situation a little easier.
If you receive a salary or a pension, you can claim the standard deduction. However, it’s important to note that self-employed people and business owners cannot claim this deduction.
How Does the Standard Deduction Lower Your Taxes?
The standard deduction reduces your taxable income by a fixed amount. This means that the amount of money on which tax is calculated becomes smaller, resulting in a lower tax bill.
For instance, if you’re in the highest tax bracket of 30%, claiming a standard deduction of ₹50,000 could save you ₹15,000 in taxes.
Example:
Let’s say your salary is ₹8,00,000 for the year, and you claim the standard deduction of ₹50,000:
| Particulars | Amount |
| Gross Salary Income | ₹8,00,000 |
| Less: Standard Deduction | ₹50,000 |
| Net Salary Income (Taxable) | ₹7,50,000 |
Now, with Section 80C deductions (like for PPF, LIC premiums, etc.), let’s say you further reduce your taxable income by ₹1,50,000:
| Particulars | Amount |
| Net Salary Income | ₹7,50,000 |
| Less: Deduction under Section 80C | ₹1,50,000 |
| Net Taxable Income | ₹6,00,000 |
In this case, your taxable income is reduced from ₹8,00,000 to ₹6,00,000, thanks to the standard deduction.
Standard Deduction for Pensioners
In India, pension income is treated as salary for tax purposes. So, if you’re a pensioner, you’re also eligible to claim the standard deduction.
- For senior citizens (aged 60-80), the standard deduction for pensioners is ₹50,000. From FY 2024-25, this will increase to ₹75,000 for those in the new tax system.
- If your pension is less than ₹50,000 or ₹75,000, you can only claim the actual amount of your pension.
Standard Deduction in the New Tax Regime
The standard deduction is now available to taxpayers under both the old tax regime and the new tax regime. This means that whether you choose to take advantage of the new tax system (which has lower tax rates but fewer deductions) or the old tax system (with higher tax rates but more exemptions), you can still claim this benefit.
For the new tax regime, the standard deduction was ₹50,000 for the year 2023-24 and will increase to ₹75,000 starting from FY 2024-25.
Can You Claim Standard Deduction for Multiple Employers?
If you worked for multiple employers during the year, you may wonder how much standard deduction you can claim. The answer is simple: you can only claim one standard deduction for the entire year, not per employer.
For example, if you worked for two employers during the financial year, you can still claim only ₹50,000 (or ₹75,000 starting from FY 2024-25), not ₹50,000 from each employer.
Conclusion
The standard deduction is a valuable tool that helps salaried individuals and pensioners reduce their taxable income and save on taxes. Whether you’re a senior citizen, a salaried worker, or a pensioner, this deduction can significantly ease your tax burden without requiring you to submit any proof of expenses.
With recent updates, such as the increase in the deduction limit from ₹50,000 to ₹75,000 in the new tax system, the standard deduction continues to be an essential benefit for taxpayers in India.
By understanding how to claim it and making sure you know the latest changes, you can make the most of this simple tax-saving strategy!
Frequently Asked Questions (FAQs)
Is the standard deduction available to senior citizens?
Yes, the standard deduction is available to all salaried individuals and pensioners, including senior citizens.
How much is the standard deduction?
The standard deduction is ₹50,000 under the old tax system, and it will increase to ₹75,000 under the new tax system starting from FY 2024-25.
Can I claim the standard deduction if my income is more than ₹5,00,000?
Yes, you can still claim the standard deduction regardless of how much you earn, as long as your income is from salary or pension.
Do I need to submit proof to claim the standard deduction?
No, the standard deduction is a flat deduction, and you don’t need to submit any proof or receipts to claim it.
How is the standard deduction different from income tax deductions like 80C?
The standard deduction is a flat amount that applies only to salary and pension income. Other income tax deductions like Section 80C (for investments) are based on actual expenses or investments made.
Can I claim both standard deduction and other income tax deductions?
Yes, you can claim both the standard deduction and other tax deductions, such as those under Section 80C (like PPF, ELSS, life insurance premiums), as they apply to different parts of your income.
