In relation to the changes that were proposed in the Budget, the Finance Act, 2018 has issued a clarification regarding applicability of standard deduction to pension received from former employerAlso Read - Budget Could Consider Levying TDS/TCS On Crypto Trading, Make It Reportable in SFT
The media statement released by the Income Tax Department states, ” Clarified Section 16 of Income–tax Act, 1961 to provide a deduction of Rs 40,000 or the amount of salary, whichever is less, to the salaried class for computing taxable income .” Also Read - Income Tax Return Filing Deadline Will Not be Extended Beyond Dec 31, Govt Makes Big Announcement
The statement further states that the pension received by a taxpayer from his former employer is taxable under the head “Salaries”. Accordingly, any taxpayer who is in receipt of pension from his former employer shall be entitled to claim a deduction of Rs 40,000/- or the amount of pension, whichever is less, under Section 16 of the Act. Also Read - Waiting For Clarity on Cryptocurrency? Govt Says Bill On Digital Currency Under Final Consideration
Standard deduction was brought back by the finance Minister, Arun Jailtley, in the Budget 2018 to offer a relief to the salaried class. While standard deduction was introduced, medical and transport allowance were withdrawan by the government, leaving a marginal tax benefit to the salaried class.