Introduction-
Standard deduction of Rs. 40,000 has introduced in budget 2018 applicable w.e.f. 01.04.2018 In Budget 2019, has increased the limit to Rs. 50,000 for the F.Y. 2019-20, as compared to previous F.Y. 2018-19 it was Rs. 40,000 to all employees against their income taxable under the head of income from salary (including pensions) but disallowed the following deductions i.e.in budget 2018-
- Transport allowance of Rs. 19,200 per annum.
- Medical Reimbursement of Rs. 15,000 per annum.
Tax benefit after introducing standard deduction-
There is a little benefit of standard deduction say Rs. 5,800 (i.e. 40,000 - 34,200) against your salary income.
If any person getting pension from previous employers etc., which is taxable under the head “Income from Salary” can claim standard deduction of Rs. 40,000 Rs. 50,000 for the F.Y. 2019-20, as compared to previous F.Y. 2018-19 it was Rs. 40,000 during the year.
With the help of the following illustration, you can understand the tax benefit-
Example-
Mr. X, aged about 35 years, living in Chandigarh at rented house, having the following details of income and investments-
|
Particulars
|
Amount (Rs.)
|
|
Basic Salary
|
6,00,000
|
|
Dearness Allowance
|
2,40,000
|
|
House Rent Allowance
|
90,000
|
|
Children Education Allowance
|
2,400
|
|
Special Allowance
|
12,400
|
|
Medical Allowance
|
15,000
|
|
Transport Allowance
|
19,200
|
|
Rent Paid
|
10,000
|
What will be the amount of Income tax benefit after allowing standard deduction for the F.Y. 2018-19 & F.Y. 2019-20?
Answer-
Income Tax benefit after introducing standard deduction-
|
Particulars
|
Amount(Rs.)
|
Amount(Rs.)
|
Amount(Rs.)
|
Amount(Rs.)
|
| |
|
F.Y. 2019-20
|
F.Y. 2018-19
|
F.Y. 2017-18
|
|
Basic Salary
|
|
6,00,000
|
6,00,000
|
6,00,000
|
|
Dearness allowance
|
|
2,40,000
|
2,40,000
|
2,40,000
|
|
House Rent Allowance
Less: HRA Exempted
(Least of the following-)
Actual Rent paid or
Rent paid – 10% of Salary* or
40% of Salary*
*(Salary means Basic Salary)
|
90,000
60,000 = 30,000 Taxable
1,20,000 or
1,20,000 – 60,000 = 60,000 or
24,000
|
30,000
|
30,000
|
30,000
|
|
Children Education Allowance
|
Rs. 100 per month, per child exempted= 100*2*12=2400
|
0
|
0
|
0
|
|
Special Allowance
|
|
12,400
|
12,400
|
12,400
|
|
Medical Allowance
|
Non Taxable
|
15,000
|
15,000
|
-
|
|
Transport Allowance
|
Non Taxable
|
19,200
|
19,200
|
-
|
|
Gross Total Income
|
|
9,16,600
|
9,16,600
|
8,82,400
|
|
Less: Standard Deduction w.e.f. 01.04.2018
|
|
-50,000
|
-40,000
|
0
|
|
Net Taxable Income
|
|
8,66,600
|
8,76,600
|
8,82,400
|
|
Income Tax as per Tax Slabs-
Up to Rs. 2,50,000 = Nil
2,50,001 to 5,00,000= 5%
5,00,001 to 10,00,000= 20%
|
|
85,820
|
87,820
|
88,980
|
|
Benefit of Tax Amount as compared to previous year
|
|
2,000
|
1,160
|
|
However, Education Cess & Higher Education cess @ 4% will be levied to all assesses whether claiming standard deduction or not.