Finance Minister Nirmala Sitharaman proposed in her Budget Speech 2023 that the benefit of standard deduction has been extended to the salaried class and the pensioners including family pensioners under the New Tax Regime.
Since the announcement, there has been some confusion among taxpayers as to whether the standard deduction provision under New Tax Regime will apply to all salaried individuals or not. Read on to clear any confusion.
The confusion around the applicability of the proposed standard deduction provision was created as the FM’s speech mentioned that each salaried person with an income of above Rs 15.5 lakh would benefit by Rs 52,500. But what about others, earning less?
Well, the FM was only citing an example of the possible impact of the introduction of the standard deduction provision in the New Tax Regime. However, tax experts and even the Central Board of Direct Taxes (CBDT) have now clarified that the standard deduction provided under the New Regime will apply to all salaried individuals and pensioners.
CBDT chairman Nitin Gupta told news agency PTI in post-Budget clarification that standard deduction has been made available in the new regime to all salaried taxpayers.
“There are about 3.5 crore salaried taxpayers in India and every salaried taxpayer will be at par with the old regime if they opt for the new regime because the standard deduction has been made available in the new regime…so in terms of parity it has been established,” Gupta was quoted as saying.
With the inclusion of the Rs 50,000 standard deduction in the new regime, salaried taxpayers with an income up to Rs 50,000 will not be required to pay any tax.
“The benefit percolates down to every section of taxpayer… Considering that standard deduction will be available to salaried taxpayers in the new regime, effectively a salaried employee with an income of Rs 7.50 lakh would not be required to pay any tax,” Gupta was quoted as saying.
Here’s what the FM said exactly:
How much standard deduction salaried individuals will get?
As per the Budget proposal, salaried individuals will get a standard deduction of Rs 50,000 if they opt for the New Tax Regime.
How much standard deduction pensioners will get?
As per the Budget proposal, pensioners will get the standard deduction of Rs 15,000. For pensioners, a deduction from income in the nature of family pension (1.3rd in income or Rs 15,000, whichever is less will apply.
When will Standard Deduction under New Tax Regime apply?
The standard deduction benefit under the New Tax Regime will apply from AY 2024-25, i.e. for income tax return filing after FY 2023-24.