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Budget 2018: Salaried Class May Expect Reintroduction Of Standard Deduction


Apart from the moderate tax structure and no change in dividend tax, the pre-budget survey highly expects the replacement of multiple outdated deductions with standard deduction to increase the take home pay for the salaried class and reduce their tax burden.

Budget 2018: Salaried Class May Expect Reintroduction Of Standard Deduction

So what is this standard deduction that was previously being allowed in Income Tax?

Earlier from the taxable income salaried class was all allowed a standard deduction from the taxable income to adjust for the household expenses.

This was allowed irrespective of the expenses or the investments made by the salaried taxpayer category.

What supports reintroduction of standard deduction for salaried employees?

The reintroduction of standard deduction for salaried class to lessen their tax burden is though a supported step as in the current times when inflation is constantly reeling high and WPI levels have surpassed the safe benchmark levels of 4%.

Also, the different limits allowing deduction for the taxpayer are not sufficient as Section 80C limit for different investments and expenses of Rs, 1.5 lakh is proposed to be increased to Rs. 2 lakh or even more. For the education also, calls are being made to increase the deduction limit to Rs. 1 lakh on a standalone basis.

The deduction allowed for health insurance is also low given the escalating medical care cost at just Rs. 15000 and it is being asked to revisit it ton increase it to Rs. 50000.

Standard deduction as an allowance for salaried class - its basics

The benefit was withdrawn in the year 2006 came forth as part of section 16 in the year 1974-75 and was taken away seeing an increase in exemption limit and 80C investment limit.

But this time its reintroduction shall be on the ground to bring in more parity or lessen the difference for employed or business class individuals and salaried class employees. As business or self employed individuals can claim deductions for the expenses towards businesses.


Previously until standard deduction was allowed for salaried class,, for those with annual salary were allowed deduction @ 40% while others got 20000 Rs as deduction amount.

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