Finance Minister Arun Jaitley has proposed to reintroduce standard deduction for salaried individuals in Budget 2018. According to Budget proposals, salaried individuals will get a standard deduction of Rs. 40,000 on income in place of the present exemption allowed for transport allowance and reimbursement of miscellaneous medical expenses. Standard deduction allows for a flat deduction from income of a salaried individual towards expenses an employee would incur in relation to his or her employment. No proof is required. Standard deduction, which was earlier available to the salaried individuals on their taxable income, was abolished with effect from assessment year 2006-07.

About 2.5 crore salaried employees and pensioners would benefit from this proposal and it would cost the government around Rs. 8,000 crore, according to the finance minister.

It will also significantly benefit pensioners, who normally do not enjoy any allowance for transport and medical expenses, Mr Jaitley said.

Currently, conveyance allowance is exempted to up to Rs.1,600 per month or Rs.19,200 a year. Salaried employees can also claim tax exemption up to Rs.15,000 per year for medical reimbursements.


Tax experts say that reintroduction of standard deduction will only provide a marginal relief to salaried employees.

COMMENTS"However, transport allowance at enhanced rate is proposed to be continued for differently abled persons. Further, it is also proposed to continue medical reimbursement benefits in case of hospitalization etc. for all employees," the Finance Minister said.

The finance minister also proposed to increase cess on personal income tax and corporation tax to 4 per cent from present 3 per cent.