Standard deduction was a part of the Income tax rules until the time it was withdrawn away in the Union Budget 2005-06. In light of the inflation, salaried class was allowed an allowance by way of standard deduction in respect of their expenses which were outside ambit of income tax rules.

This was also allowed to offset the difference in taxation in respect of professionals or self-employed and salaried class individuals. In the earlier regime, when standard deduction was allowed it was deducted as a straight deduction from salary to then arrive at the taxable salary. Another advantage that came with standard deduction was that it did not require any associated proofs to be shown.

The allowed deduction as part of standard deduction was Rs. 30000 or 40% of income whichever is lower for employees with annual income in the range of Rs. 75000 to Rs. 5 lakh. And for those with earning over Rs. 5 lakh were allowed a standard deduction of Rs. 20000.

Currently, standard deduction is allowed to self employed as well as pensioners from their income. To the family pensioners, the allowed deduction is either Rs. 15000 or 1/3 of the total pension amount whichever is lower.

What Union Budget 2018 can likely announce in respect of standard deduction for salaried class?

A straight deduction of Rs. 50000 can be allowed from the salary in respect of the several expenses that currently are not included in the Income tax law so as to reduce the tax outgo for them.

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