Is there Rs 50,000 standard deduction available in new tax regime?
Yes. Standard Deduction of Rs 50,000 is now available for EVERY Salaried & Pensioners under the New Tax Regime in India (2023). This new change has been introduced under Section 16(ia) in Budget 2023, and for new tax regime which was introduced as an alternative tax system under section 115BAC.
Earlier, the standard deduction of Rs 50,000 which was so far available only under old tax regime has now been extended to new tax regime for salaried and pensioners including family pensioners.
Now there was some confusion among many Standard deduction is allowed if salary income is below Rs 15.5 lakh?
The reason for this confusion was because the finance minister made the following statement in Budget – “Each salaried person with an income of Rs 15.5 lakhs or more will stand to benefit by Rs 52,500 as standard deduction.”
But there is no need for confusion. Standard deduction in new tax regime is allowed even if your salary income is below Rs 15.5 lakh.
This statement by FM also confused few that whether standard deduction is Rs 50,000 or Rs 52,500?
Once again, let me clear it. Standard Deduction is Rs 50,000 only. You may ask then what is Rs 52,500? This will become clear when you see the following examples:
Tax as per New Tax Regime (till March 2023)
Income – Rs 15.5 lakh
Standard Deduction (New Regime till FY2022-23) – Nil
Taxable Income – Rs 15.5 lakh
Calculated Tax – Rs 2,02,500
Tax as per New Tax Regime (from April 2023)
Income – Rs 15.5 lakh
Standard Deduction (New Regime from FY2023-24) – Rs 50,000
Taxable Income – Rs 15.0 lakh
Calculated Tax – Rs 1,50,000
So due to introduction of Standard Deduction under new tax regime, there is lower tax liability (or benefit) of Rs 52,500. And this figure is what is confusing many. The figure of Rs 52,500 is the benefit in the example given by the finance minister in Budget speech.
The standard deduction is Rs 50,000 only and not Rs 52,500.
To summarize and clear any remaining doubts, here are few crisp answers to a couple of questions that many of you might have.
Q – Who is eligible for Rs 50,000 standard deduction in new income tax regime?
A – The answer is everyone, i.e. all salaried and pensioners in India are eligible for taking the benefit of Rs 50,000 standard deduction if they opt for the new tax regime.
Q – How to claim standard deduction of Rs 50,000 under the new tax regime?
A – The standard deduction of Rs 50,000 is available as a straight deduction from the salary or pension income. There is no need to submit any proofs or bills to claim standard deduction. There is also no need to make any investments to claim standard deduction under the new tax regime.
I think in order to make the new tax regime more attractive for everyone and increase adoption, standard deduction of Rs 50,000 has been allowed to all the salaried individuals and pensioners in India under the new tax system as well (it was already available in old tax system). But the Standard deduction of Rs 50,000 is available in new tax regime from FY 2023-24, i.e., starting from 1st April, 2023.