When it comes to paying income tax, there are several deductions that can help reduce your tax liability. One of the most common deductions is the standard deduction, which is available to salaried individuals and pensioners. In this article, we’ll go over what the standard deduction is, how it works, and who is eligible for it.
What is the Standard Deduction?
The standard deduction is a fixed amount that can be deducted from your total income before calculating your taxable income. This means that you pay tax on a smaller portion of your income, which can help reduce your overall tax liability. The standard deduction is available to both salaried individuals and pensioners.
How Does the Standard Deduction Work?
The amount of the standard deduction is determined by the government and is typically adjusted each year to account for inflation. For the 2021-2022 financial year in India, the standard deduction for salaried individuals is Rs. 50,000, while for pensioners it is Rs. 75,000. This means that if you are a salaried individual or pensioner, you can deduct Rs. 50,000 or Rs. 75,000 from your total income, respectively, before calculating your taxable income.
Who is Eligible for the Standard Deduction?
The standard deduction is available to all salaried individuals and pensioners, regardless of their income level. However, it is important to note that if you choose to claim any other deductions or exemptions, such as those related to investments or medical expenses, you may not be able to claim the full amount of the standard deduction.
It’s also worth noting that if you receive a pension from a former employer, you may be eligible for a higher standard deduction. In this case, the standard deduction is based on the amount of your pension, rather than your total income.
The standard deduction is a valuable tool for salaried individuals and pensioners who want to reduce their tax liability. By deducting a fixed amount from your total income, you can pay tax on a smaller portion of your income, which can help lower your tax bill. If you’re a salaried individual or pensioner, be sure to take advantage of the standard deduction when filing your income tax return.