alaried people must have lost the smile on their faces when the Budget did away with standard deduction.

Here's a look at what standard deduction is and its effect post Budget.

What is standard deduction?

It is a fixed deduction from your salary irrespective of your designation.

How is it helpful?

Since a fixed amount is deducted, it reduces your taxable income immediately and hence the tax paid eventually.

Who can claim it?

• A salaried employee
• A pensioner

What is the amount of standard deduction? 

Salary includes any wages, annuity, pension, gratuity, fees, commission, perquisite, any advance of salary, leave encashment, etc less deductions under Section 10 of the Income Tax Act, like house rent allowance and conveyance allowance.

What if you have two employers in a year?

Even if you have shifted jobs in a year, the maximum amount of standard deduction remains the same.

Pre Budget

Salary	Rs 440,000	Rs 550,000
Standard Deduction	Rs 30,000	Rs 20,000
Net Salary	Rs  410,000	Rs 530,000

Post Budget

Salary	Rs 440,000	Rs 550,000
Standard Deduction	0	0
Net Salary	Rs 440,000	Rs 550,000

The taxable income is increased to Rs 440,000 and Rs 550,000 (post Budget) as against Rs 410,000 and Rs 530,000 (pre Budget) respectively. Without standard deduction, you will be taxed on a higher income.

The good news is, even though the standard deduction has been taken away, the net tax payable will be 
less (post budget), due to the revised tax rates. So there is still reason to smile!

Cnergies is an end-to-end solution provider for Tax-Payroll-HR and provident fund