Finance Minister Nirmala Sitharaman, in her Union Budget 2023 speech, suggested the standard deduction benefit be extended to the salaried class, retirees, including family pensioners, under the New Tax Regime. Since the announcement, there has been significant uncertainty among taxpayers regarding whether or not the New Tax Regime’s standard deduction provision will apply to all salaried people. If you’re still unclear, keep reading.

The FM’s speech stated that each salaried person with an income of over Rs 15.5 lakh would benefit by Rs 52,500, which led to uncertainty regarding the new standard deduction provision’s applicability. But what about others who make less money?

The Finance Minister was merely providing a hypothetical scenario to illustrate the potential effects of the standard deduction provision’s inclusion under the New Tax Regime. However, tax professionals and even the Central Board of Direct Taxes (CBDT) have recently made it clear that all salaried people and pensioners will be eligible for the standard deduction offered by the New Regime.

In a post-Budget statement, CBDT Chairman Nitin Gupta informed news agency PTI that under the new system, the standard deduction is now available to all salaried taxpayers. According to Gupta, “there are around 3.5 crore salaried taxpayers in India, and if they choose the new regime, every salaried taxpayer will be at par with the previous regime because the standard deduction has been made available in the new regime… therefore in terms of parity it has been established.”

Salaried taxpayers with an income up to Rs 50,000 will not be required to pay any tax thanks to the presence of the Rs 50,000 standard deduction in the new regime. “The benefit filters down to every taxpayer segment… Given that the standard deduction will be accessible to salaried taxpayers under the new system, an employee with an annual salary of Rs. 7.50 lakh would virtually not be required to pay any taxes.

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