The Union budget 2018, the Finance had proposed some major changes in the income tax laws, which becomes effective from the beginning of the FY 2018-19, i.e., April 1st, 2018. These new tax rules will have an impact on one’s finances and tax planning, so it becomes extremely important for every taxpayer to be aware of them.
The Finance Minister, in Budget 2018, has not brought in the much-expected changes in tax slabs. Nor has he touched Section 80C with regard to raising the limits for the individual taxpayers. However, the salaried class still have something to rejoice about after the budget.
He has proposed to reintroduce the ’Standard Deduction’ of Rs 40,000.
What is a standard deduction?
Standard Deduction is a fixed deduction from the salary irrespective of the position held in the organization. Since a fixed amount is deducted from the annual salary, it reduces the taxable income, and hence the tax paid amount will also reduce. A Salaried employee and a pensioner can claim Standard Deduction.
Salaried people from the FY 2018-19 are entitled to a standard deduction up to Rs 40,000. This deduction can be availed against the salary received by the employer during this year. Pensioners who do not enjoy any allowance for transport and medical expenses will now be able to claim this benefit against the pension received. The tax exemption in respect of transport allowance of Rs 19,200 and reimbursement of medical expenses of Rs 15,000 has now gone away with the introduction of standard deduction of Rs 40,000.
This tax deduction of Rs 40,000 will be made directly from your salary, and you are not required to submit any investment proof or bills to take advantage of the benefit. This standard deduction has resulted to avail the net reduction of Rs 5,800 in the amount of taxable salary, in comparison to previous financial years.