Standard deduction was introduced in the Union Budget 2018. This deduction was announced in lieu of transport allowance and medical reimbursement. Till FY 2017-18, an individual was allowed to claim exemption of Rs 19,200 for transport allowance and Rs 15,000 for medical reimbursement (provided medical bills are submitted to the employer). The standard deduction was introduced to ease the documentation compliance employees. An individual taxpayer is not required to submit any bills to the employer to claim the standard deduction. In interim budget 2019, the standard deduction was hiked to Rs 50,000 from Rs 40,000 earlier.
The standard deduction is not a new concept. This deduction was available till FY 2004-05. At that time, the amount of deduction allowed was equivalent to Rs 30,000 or 40% of the income whichever is lower for those earning between Rs 75,000 and Rs 5 lakh. For those earning above Rs 5 lakh, standard deduction limit was set at Rs 20,000.
