Still Unclear About Standard Deduction? Learn Whether You Can Claim It In New Tax Regime
New tax regime has eliminated various deductions under the Income-tax Act. Read on to learn if you can claim standard deductions in FY2022-23
New tax regime has eliminated various deductions under the Income-tax Act. Read on to learn if you can claim standard deductions in FY2022-23
Unclear About Standard Deduction
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The new tax regime was introduced in 2020, but taxpayers were allowed to continue with the old regime if they chose to do so. But due to the withdrawal of various deductions in the new regime, there were few takers.
The old tax regime allows the standard deduction of Rs 50,000. If you wonder whether this deduction has been removed in the new regime like many other deductions, this is right, but only for Financial Year 2022-23 (Assessment year 2023-24).
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So, while filing an income tax return (ITR), if you are surprised why the deductions column is inactive in the new tax regime, it is because this is not applicable for FY2022-23.
According to Kavita Rani, Partner, Gupta Jalan & Associates, “In the new tax regime introduced in FY2020-21, taxpayers can opt for lower tax rates but without availing certain deductions and exemptions, including the standard deduction. Hence, under the new tax regime, there is no specific standard deduction for any category of taxpayers for FY2022-23”.
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She further says, “The standard deduction is only available for salaried employees and government and private sector pensioners. This does not apply to self-employed persons such as freelancers.”
Section 16 in the Income Tax Act is about the standard deduction applicable for the salaried and the pensioners. However, a standard deduction will not be available if the income is from other sources.
Unlike other deductions, such as 80C, 80D, 80TTA, etc., this standard deduction is a flat Rs 50,000, which doesn’t need calculation like other deductions mentioned above. The standard deduction in the old tax regime in FY2022-23 for people below 60 years, senior citizens (aged 60 years or more), and super senior citizens (aged 80 years or more) is Rs 50,000.
Rani says to avail of the standard deduction, “Form 16 itself is good to avail the standard deduction.”
So, if you are opting for the old tax regime, you can avail standard deduction, but if you are opting for the new tax regime in FY2022-23, the standard deduction is not available this year but will be there from FY2023-24.
Rani says, “The new tax regime offers lower tax rates than the old regime, which can benefit those with higher incomes. However, taxpayers cannot claim several deductions and exemptions, including the standard deduction, under this regime.”
So, one should opt for the old tax regime or the new one depending on factors, including income sources, deductions, and individual financial situations.
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