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Standard deduction and its implications on salaried employees


In the chaos of working from home, almost everyone was hoping for the central government to give an allowance for work from home in the recent Budget 2022. This means that it would compensate the other expenses that the employee had to bear when working at home i.e. internet bills, telephone or furniture setup expenses.

Standard Deduction

The standard deduction is usually deducted from the gross salary and claimed as an exemption without having to show any proof of expenses. The standard deduction provision was introduced in the Budget 2018 (by withdrawing tax benefits on medical and transport allowance then available) that those having a salary income are eligible for a deduction of 40,000 or the gross salary, whichever is lower. The limit was increased to 50,000 in the subsequent budget.

Amit Gupta, MD, Sag Infotech said, “The standard deduction would be directed to the part of the income, not for the tax which could be used to lessen your tax bill. As a rule, the standard deduction is deducted from the gross salary without showing any proof of expenses. Thus the same flat amount of 50,000 would be deducted from the total salary, which draws a lower tax on an individual's income, hence diminishing the tax outgo. The salaried employee could avail of the deduction, whatever be the type and the need of the investment.”

Gaurav Kapoor, director, and co-founder, of Fincorpit Consulting, said, The standard deduction would be available for up to 50,000 in a fiscal year. But you could avail of the same deduction for one time only. For instance, if in a year you have worked with the two employers then with 50,000 your standard deduction will be limited and is a standard deviation available only on the salaried income. The rebate on the different sides is available on your total incurred income.

Benefits of Standard deduction

The major benefit of the standard deduction  is that it diminishes the total salary by a flat 50,000 in whatever income tax slab you come. Furthermore, it is a deduction available via salary income. No concept of different tax slabs would be there.

 

 

 

 



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