As announced in the Union Budget 2023, the benefit of standard deduction for Income Tax payers has been extended to the new regime. Salaried individuals, pensioners and family pensioners can now avail of standard deductions under the new regime.
Many of you might be aware of the various deductions provided under Sections 80C, 80D, 80DDB and other provisions of Income Tax Act. But, all the taxpayers can avail the standard deduction even without any investment.
The most common way to reduce your taxable income is to claim the deductions provided under Section 80C. It allows deductions up to Rs 1.5 lakh for investments made in various instruments such as Public Provident Fund (PPF), Equity Linked Savings Scheme (ELSS), National Pension System (NPS), Tax-saving Fixed Deposits (FD) and others. The second most common way to reduce your taxable income is through Section 80D. This section allows for deductions on health insurance premiums paid for self, spouse, children and parents. The maximum deduction available under this section is Rs 25,000, and for senior citizens, it is Rs 50,000.
Under Section 16 of the Income Tax Act 1961, every salaried person can get a standard deduction on their taxable income. You do not have to submit any documents or investment proof to claim it. If someone is a pensioner, then they can also take advantage of this standard deduction. For this, you do not need to either buy insurance or show any proof of investment.
The government keeps changing the standard deduction from time to time keeping in mind the inflation. Currently, taxpayers can get a standard deduction of up to Rs 50,000. This means that without doing anything, you can save up to Rs 50,000. The biggest benefit of this is for those salaried individuals who come in the taxable income slab only because of the margin of Rs 50,000. Standard deduction reduces your taxable income by Rs 50,000 and in turn, reduces your tax liability.
Earlier the benefit of standard deduction was limited only to those who opted for the old tax regime. However, following the Union Budget 2023, this benefit has also been extended to those opting for the new tax regime. Whichever tax regime you choose, you are entitled to claim a standard deduction of Rs 50,000. In the new tax regime, the tax exemption limit has also been increased to Rs 3 lakh.
It must be noted here that the last date for filing Income Tax Return (ITR) is July 31.
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