The standard deduction for employees | With Automated Income Tax Arrears Relief Calculator U/s 89(1) for the F.Y.2022-23 and A.Y.2023-24

The deductions in the Income Tax Law give taxpayers a reason to smile because they help reduce tax

 liability. One of those fun provisions for salaried people in IT law is the “standard deduction.”

As its name implies, a standard deduction allows you to deduct a certain amount from your gross wages so that your total taxable income is reduced. The most important point to note is that the standard deduction feature is not available to those who opt for the new tax system, which comes with lower tax rates than previous deductions.

Download and Prepare at a time 50 Employees Form 16 Part B for theF.Y.2021-22

Master data sheet

The standard deduction provision was made in the 2018 budget (through the withdrawal of tax benefits on Medicare allowance and transport available thereafter) that those with wage income are eligible for a deduction of Rs 40,000 or gross salary, whichever is less. The limit was increased to Rs 50,000 in the subsequent budget. For example, a taxpayer named “X” has an annual gross salary of Rs 5 lakh a year. The standard deduction available in this case is Rs 50,000 (less than the standard deduction limit of Rs 50,000 and a salary of Rs 5 lakh).


Suppose X only worked for one month in the fiscal year and earned approximately Rs 42,000 as salary income. For that year, the qualified standard deduction will be Rs 42,000 per application of the provision.

Download and Prepare at a time 50 Employees Form 16 Part A&B for the F.Y.2021-22 

Income Tax Form 16

What happens if the employee changes jobs within a tax year? The standard deduction is not based on the number of jobs changed by the employee.

“Gross salary here includes all salary components and covers the taxable portion of allowances and benefits paid by the employer

In other words

By extending the benefit of the standard deduction for pensioners, the Income Tax law allows pensioners to also claim this deduction. Please note that the pension here does not include the family pension, which is awarded to dependent family members, after the death of the employee; the family pension is charged to income tax from other sources.

Discount, no discount

A deduction is different from a reduction, which is a type of partial refund of the tax to be paid. It is allowed to claim income tax deductions from the income, while it is allowed to claim deductions from the tax payable.

Download and Prepare at a time 100 Employees Form 16 Part B for theF.Y.2021-22

Standard deduction for employees

Section 87A of the Income Tax Act gives a deduction to those who have an income of not more than Rs 5 lakh (after allowing deductions) to reduce their tax liability.

The deduction is 100% of the tax liability or Rs 12,500, whichever is less.

How is the standard deduction calculated for multiple employers?

The standard deduction is not available without basis. from employers The standard deduction is the general limit for a full year rather than not. of employers

Let’s assume that Mr. A worked for 2 employers during the 2019-2020 tax year. In this case, you may be suspicious of how much standard deduction Mr. A can claim.

Option 1 Rs. 50000

Option 2 Rs. 1,00,000 (Rs.50,000 per employer)

The correct answer is option 1, ie Mr. A can avail of the standard discount up to Rs. 50,000/-

Download and Prepare at a time 100 Employees Form 16 Part A&B for the F.Y.2021-22

Standard deduction for employees

Frequent questions

Q- Is the standard deduction also available for the elderly?

Yes, the standard deduction is available to all taxpayers and retirees, regardless of age.

Q- Can the employee claim both the standard deduction and the income tax deduction?

Yes, the employee can claim both standard deductions and income tax deductions.

Q- What article of the Income Tax Law covers the standard deduction?

Section 16(ia) of the Income Tax Law deals with the standard deduction.

Q- Is the standard discount available for freelancers in India?

Self-employed workers do not earn income from wages. They have a business income. Therefore, self-employed individuals cannot claim the standard deduction because the standard deduction is only available from earned income.

Q: Does the standard deduction of Rs 50,000 under Section 16 apply to a person whose only source of income is FD interest?

No, the standard deduction is only available from salary and pension income and not from income from other sources.

Download Automated Income Tax Arrears Relief Calculator U/s 89(1) from the F.Y.2000-01 to F.Y.2022-23(Updated Version)

Standard deduction for employees
Annexure I
Form 10E
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