2 Types of Standard Deductions in Income Tax 2022

 

A Standard deduction is basically an income tax deduction, regardless of expense incurred or investment made by the Individual.

For this type of income tax standard deduction, there are no disclosures/investment proofs/Expense bills required. It is allowed at a regular rate.

As explained below, India has 2 types of Standard deductions.

1. Standard Deduction From Rent: Standard deduction @ 30% allowed for Income From Rent
2. Standard Salary Deduction: Standard Deduction in Rs. Salary Income: 50,000

Standard deduction from rental income @ 30%

The Head Income From House Property is where the Rental Income falls. In order to calculate the Net Annual Value, the person earning Rental Income is allowed to first reduce the Municipal and other taxes payable to the Local Authority.

The Standard Deduction for rental income does not take into account actual expenses. The Standard Deduction includes any expenses such as maintenance or repairs that are necessary to maintain the property's health. You do not need to provide proof of actual expenses.

A person who receives rent from multiple properties would be allowed to claim the standard deduction of 30% from all properties.

It is important to remember that the Standard Deduction cannot be used on Rent received for renting out an apartment/building but not on Rent received from renting off vacant land.

Standard Deduction on Salary

The standard deduction of Rs. Budget 2019 introduced the standard deduction of Rs.50,000 and it is now applicable to Financial Year 2019-20.

This deduction is permissible regardless of what actual expense was incurred by an employee. For this deduction to be claimed, the employee does not need to submit any proofs or bills to the employer.

This deduction was introduced in place of Transport Allowance and Medical Rembursement . These benefits were previously allowed to employees, and employees had to submit bills to support their claims. The Transport Allowance deduction and Medical Reimbursement deduction have been eliminated and Standard Deduction has been implemented in their place.

This is a cumulative deduction. It does not apply to salary received from more than 2 employers in the past year. The maximum standard deduction allowed would still be applicable, i.e. Rs. 50,000 (in aggregate). No matter if you received salary income from a large corporation or small proprietorship, the standard deduction can be claimed.

Other deductions permitted in income tax

Other than the Standard Deduction @ 30 percent, there are many other deductions. Some of these deductions are only available for Salaried Employees. However, the rest of the deductions can be used by everyone including Salaried employees.

The only deductions that are available to salaried employees are the Deduction of Entertainment Allowance and the Deduction for Professional Tax. Other than these Deductions there are many exemptions available to salaried workers.