New Delhi: Finance Minister Arun Jaitley made the middle class happier by bringing back standard reduction of Rs 40,000 for the salaried employee.For those wondering what a standard deduction, here's a crash course. Standard deduction is the portion of income that is not subject to tax and that can be used to reduce a taxpayer's tax bill. Standard deduction also means that taxpayers need not share any disclosures, investment proofs, or expense bills. At the moment, the standard deduction is applicable for income from rent, which is categorised within income from house property. Business class on the contrary has reaped the benefits of claiming expenses such as rent, driver salaries, entertainment, travel etc. as deductions.
The concept of Standard Deduction was not alien to Indians, but was called off in in the 2005-2006 budget by the then Finance Minister P Chidambaram. Until 2006, salaried professional earning under Rs 5,00,000 could allocate an amount of Rs 20000 as a standard deduction in his tax returns. Standard deduction will allow for a flat deduction from salary income, to make up for some of the expenses which an employee would typically incur in relation to his employment.