Standard deduction on salary income

Section 16, inter-alia, provides for certain deduction in computing income chargeable under the head “Salaries”. it is proposed to allow a standard deduction upto Rs 40,000/- or the amount of salary received, whichever is less. Consequently the present exemption in respect of Transport Allowance (except in case of differently abled persons) and reimbursement of medical expenses is proposed to be withdrawn.

These amendments will take effect from financial year starting from 1st April, 2018 and will, accordingly, apply in relation to the financial year 2018-29 and subsequent financial years.

Extract of Clause 7 and 8 of Finance Bill 2018

Clause 7 of the Bill seeks to amend section 16 of the Income-tax Act relating to deductions from salaries.

The existing provisions of the said section, inter alia, provide that the income chargeable under the head “Salaries” shall be computed after making certain deductions specified therein.

It is proposed to insert a new clause (ia) in the said section so as to provide for deduction of forty thousand rupees or the amount of the salary, whichever is less, for the purpose of computing the income chargeable under the said head.

This amendment will take effect from 1st April, 2019 and will, accordingly, apply in relation to the assessment year 201 9-2020 and subsequent years.

Clause 8 of the Bill seeks to amend section 17 of the Income-tax Act relating to “Salary”, “perquisite” and “profits in lieu of salary” defined.

Clause (v) of the proviso occurring after sub-clause (viii) of clause (2) of the said section provides that any sum paid by the employer in respect of any expenditure actually incurred by the employee on his medical treatment or treatment of any member of his family not exceeding fifteen thousand rupees in the previous year shall not be treated as perquisite in the hands of the employee.

It is proposed to omit the said clause (v).

This amendment will take effect from 1st April, 2019 and will, accordingly, apply in relation to the assessment year 2019-2020 and subsequent years.

[Clause 7 & 8]

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Category : Income Tax (27898)
Type : Articles (17602)

24 responses to “Rs 40,000 Standard deduction on salary income”

  1. subramanya says:

    if one employee worked 2 month & he left and again joined in after 3 month same company he will get 2 time standerd deduction 40000/- or no

  2. Priyanka says:

    Please let me know, if this standard deduction is allowed to non residents also ?

  3. Rajesh Kumar says:

    Sir, I am a teacher. I am not getting any transport allowance.Can I take profit of Standard deduction???

  4. PARVEEN KUMAR says:

    pls let me know if any employee discontinue in his job. he fully eligible for this deduction (Standard deduction section 16)

  5. Argha says:

    If any one served for 2 months then if he will eligible for Rs.40000/2 or Rs.40000/-,please reply.

  6. T C Jain says:

    kindly tell about the rules in case of differently abled persons,is there any new instruction which has come up?

  7. C.P.V.RATNAM says:

    We, the pensioners, are grateful to Deepak Dang who observed that standard deduction should be qapplicable to pensioners too.

  8. C.P.V.RATNAM says:

    It is a boon to the pensioners as RS.40,000/- Standars Deduction and the aged pensioners are benefitted early from AY:2017-2018 and thereqafter..

  9. RAJA SHEKAR PAPPULA says:

    you mention 1st April 2019 is wrong it is effect from 1st April 2018

    • TG Team says:

      That is correct but you can read the same as These amendments will take effect from financial year starting from 1st April, 2018 and will, accordingly, apply in relation to the financial year 2018-19 and subsequent financial years.

  10. NEELESH SONI says:

    Is standard deduction 40000 rs which is announce in budget 2018 …will be effective in AY 2017-2018..????
    means can we deduct 40000 rs from our gross salary this year….????

  11. Devendra Sharma says:

    what if Salary received from two difference firm ?
    40k +40k = 80k can deduction as Standard Deduction ?

    • Manish Gupta says:

      Maximum Limit of Standard Deduction is 40000 /- allowed to one Assessee. it is not depend of No. of employer

  12. Makardhwaj says:

    K.Thandavamoorthy says:
    February 2, 2018 at 7:02 pm
    It is effective from 1.4.2019, then it would have been announced in the next budget.

    Reply
    nmb says:
    March 20, 2018 at 12:40 pm
    which means, the provision come into force w.e.f AY 2019-20, ie; FY 2018-19
    I agree with Mr.K.Thandavamoorthy and it should be rectified in article.

  13. Ranjeet Kumar says:

    As per Para 15.13
    The following shall; not be treated as perquisite.
    1. If medical facility provided in a hospital , Clinic or nursing home maintained by the employer.
    2. Reimbursement by the employer, incurred by the employee on his medical treatment in any hospital, maintained by the Govt., Local Authority or in a hospital approved by the Govt.

    In such a case, if the above condition as refereed in para 15.13 is fulfilled, then how the newly introduced slandered deduction will be introduced in the salary? or para 15.13 will be abolished?

    • Manish Gupta says:

      Only this perquisite will omitted ,In case treatment is taken from a private or unrecognised hospital, the benefit is exempted up to 15,000 p.a

      Rest of perquisites as it is.

  14. G. Ray says:

    If a retired private sector employee has only bank interest income, then can he avail Std Deduction?

    • vignesh says:

      This deduction is available for income under the head salary.If you receiving Pension then it is chargeable under salary so you can claim Deduction otherwise if you are not have any income under the salary then you not eligible for this deduction.

  15. K.Thandavamoorthy says:

    It is effective from 1.4.2019, then it would have been announced in the next budget.

  16. Deepak Dang says:

    Standard deduction should be applicable to pensioners too.

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