Section 19 of the Income-tax Act, 2025 gives the deductions from salary in a single table. The standard deduction is ₹75,000 where tax is computed under section 202(1) and ₹50,000 in any other case. The table also carries gratuity, commuted pension, retrenchment and voluntary retirement limits.
What section 19 does
Section 19 is the most consequential salary provision in the Act for an ordinary taxpayer, because it is where money actually comes off the taxable figure. It does something the 1961 Act never did: it puts the standard deduction and the retirement exclusions in the same table.
Under the old law, the standard deduction and professional tax were in section 16, while gratuity, commuted pension, leave encashment, retrenchment compensation and voluntary retirement receipts were exemptions scattered through section 10(10), 10(10A), 10(10AA), 10(10B) and 10(10C). Section 19 gathers all of them into one table of fourteen entries, so a salary computation can be done from a single provision.
The headline number: the standard deduction is ₹75,000 or the salary, whichever is less, where income-tax is computed under section 202(1) — that is, under the new regime — and ₹50,000 or the salary, whichever is less, in any other case.
The Income-tax Act, 2025 takes effect from 1 April 2026 and applies from tax year 2026-27. The Income-tax Act, 1961 continues to govern every year up to 31 March 2026, including assessments, appeals and penalties for those years, because of the repeal and savings provision in section 536. Figures quoted here are the amounts written into the Act as enacted (with the Gazette corrigenda of 3 September 2025); the annual Finance Act can change rates and thresholds.
Old Act and new Act, side by side
The table below shows what the Income-tax Act, 1961 did and where the same ground is covered in the Income-tax Act, 2025.
| Income-tax Act, 1961 | What it did | Income-tax Act, 2025 |
|---|---|---|
| 16 | Standard deduction, professional tax, entertainment allowance | 19(1) — Table serial numbers 1 and 2 |
| 10(10) | Gratuity exemption | 19(1) — Table serial numbers 3 to 6 |
| 10(10A) | Commuted pension exemption | 19(1) — Table serial numbers 7 to 9 |
| 10(10B) | Retrenchment compensation exemption | 19(1) — Table serial numbers 10 and 11 |
| 10(10C) | Voluntary retirement exemption | 19(1) — Table serial number 12 |
| 10(10AA) | Leave encashment exemption | 19(1) — Table serial numbers 13 and 14 |
Section 19 sub-section by sub-section
Read this alongside the bare text — each heading below is a sub-section of the section as enacted.
Sub-section (1) — the deduction table
Income chargeable under the head Salaries is computed after making the deductions listed in column B of the table, not exceeding the amount in column C. The table is reproduced below from the Act as enacted. Note that the deductions are capped individually, not by a single overall ceiling.
Standard deduction — the regime split
Serial number 2 is the standard deduction. It is ₹75,000 or the salary, whichever is less, where income-tax is computed under section 202(1) — the new regime that is the default. In any other case it is ₹50,000 or the salary, whichever is less. So the regime you are taxed under changes the deduction by ₹25,000.
Gratuity — serial numbers 3 to 6
Government death-cum-retirement gratuity (serial 3) and defence retiring gratuity (serial 4) are deductible in full. Gratuity under the Payment of Gratuity Act, 1972 (serial 5) is deductible as computed under section 4(2) and (3) of that Act. Any other gratuity (serial 6) is the minimum of the actual gratuity, the limit notified by the Central Government, and half a month's salary for each completed year of service, computed on the average salary of the ten months immediately preceding the event.
Commuted pension — serial numbers 7 to 9
Commutation under the Civil Pensions (Commutation) Rules or a similar scheme for civil services, all-India services, defence services, State civil services and employees of local authorities and statutory corporations is deductible in full (serial 7). Other commutation (serial 8) is valued having regard to officially recognised tables of mortality. Serial 9 allows the entire amount for a further specified category.
Retrenchment and voluntary retirement — serial numbers 10 to 12
Compensation received by a workman at retrenchment (serial 10) is the minimum of the compensation received and the amount calculated under the Industrial Disputes Act, 1947 basis. Serial 11 allows the compensation received in a specified case. Voluntary retirement (serial 12) is the minimum of the compensation received and ₹5,00,000.
Leave encashment — serial numbers 13 and 14
Payment to a Central or State Government employee (serial 13) is deductible in full. For others (serial 14), the deduction is the minimum of the cash equivalent of leave and other specified measures, and is subject to an aggregate lifetime cap under sub-section (2)(f).
Sub-section (2) — the conditions that limit the table
This sub-section carries the fine print. Clause (e) makes the voluntary retirement deduction conditional on the scheme meeting prescribed guidelines including economic viability, bars a second claim in another year, and denies the deduction where relief under section 157 has already been allowed on the same amount. Clause (f) applies the lifetime aggregate cap on leave encashment using the formula A – B, where A is the limit notified by the Central Government and B is the aggregate already allowed in earlier years. Clauses (g) and (h) define which gratuities and which voluntary retirement schemes qualify.
The section 19 deduction table, as enacted
This is the table in section 19(1) of the Income-tax Act, 2025. Long entries are abridged for readability — read the bare section for the full wording of each entry.
| Sl. No. | Nature of sum | Amount of deduction |
|---|---|---|
| 1. | Sum paid by the assessee as a tax on employment as per article 276(2) of the Constitution, leviable by or under any law. | Entire amount. |
| 2. | Standard deduction. | (a) ₹ 75000 or the salary, whichever is less, where income- tax is computed under section 202(1); (b) ₹ 50000 or the salary, whichever is less, in any other case. |
| 3. | Death-cum-retirement gratuity received as referred to in sub- section (2)(g). | Entire amount. |
| 4. | Payment of retiring gratuity received under the Pension Code or Regulations applicable to the members of the defence services. | Entire amount. |
| 5. | Gratuity received under the Payment of Gratuity Act, 1972 (39 of 1972). | Amount received, as restricted to the amount calculated as per the provisions of section 4(2) and (3) of the said Act. |
| 6. | Any other gratuity received by an employee— (i) on his retirement; or (ii) on his becoming incapacitated before such retirement; or (iii) on termination of his employment. | Amount being minimum of— (a) actual gratuity received; (b) amount specified by the Central Government, by notification, having regard to the limit applicable in this behalf to the employees of the Central Government; and (c) half month’s salary for each completed year of service, calculated as under:— Amount = (A × B) ÷ 2, where,— A = average salary for ten months immediately preceding the month when any such event … |
| 7. | Payment in commutation of pension received— (a) under the Civil Pensions (Commutation) Rules of the Central Government; or (b) under any similar scheme applicable to–– (i) the members of the civil services of the Union or holders of posts connected with defence or of civil posts under the Union, ; (ii) the members of the all-India services; (iii) the members of the … | Entire amount. |
| 8. | Payment in commutation of pension is received under any scheme from any other employer. | The commuted value shall be determined having regard to the age of the recipient, the state of his health, the rate of interest and officially recognised tables of mortality, and— (a) where the employee has received gratuity, the commuted value of one-third of the pension, which he is normally entitled to receive; and (b) in any other case, the commuted value of one-half of such pension. |
| 9. | Payment in commutation of pension received from a fund as specified in Schedule VII (Table: Sl. No. 3). | Entire amount. |
| 10. | Compensation received by a workman at the time of his retrenchment— (a) under the Industrial Disputes Act, 1947 (14 of 1947); or (b) under any other Act or rules, orders or notifications issued thereunder; or (c) under any standing orders; or (d) under any award, contract of service or otherwise. | Minimum of— (a) compensation received; (b) amount calculated as per provisions of section 25F(b) of the Industrial Disputes Act, 1947 (14 of 1947); (c) such amount, not being less than ₹50000, as may be notified by the Central Government. |
| 11. | In case of compensation referred to in Sl. No. 10, where such compensation received is in accordance with any scheme which the Central Government may approve in this behalf, having regard to–– (a) the need for extending special protection to the workmen in the undertaking to which such scheme applies; and (b) other relevant circumstances. | Compensation received. |
| 12. | Amount received or receivable on voluntary retirement or termination of service under a scheme or schemes of voluntary retirement, by an employee as referred to in sub- section (2)(h). | Minimum of— (a) compensation received; and (b) ₹ 500000. |
| 13. | Payment received by an employee of the Central Government or a State Government as the cash equivalent of the leave salary in respect of the period of earned leave at his credit at the time of his retirement whether on superannuation or otherwise. | Entire amount. |
| 14. | Payment of the nature referred against serial number 13 received by an employee who is not a Central Government or State Government employee. | Amount being minimum of— (a) the cash equivalent of the leave salary in respect of the period of earned leave at his credit at the time of his retirement, whether on superannuation or otherwise (entitlement of earned leave shall not exceed thirty days for every year of actual service); (b) amount “A”, where,— A =10×B; B = average monthly salary for the ten months immediately preceding his retirement whether on … |
Worked example
An employee retires in tax year 2026-27 and is taxed under the default new regime, so section 202(1) applies.
| Item | Amount |
|---|---|
| Salary for the year | ₹18,00,000 |
| Gratuity received (not covered by the Payment of Gratuity Act) | ₹9,00,000 |
| Leave encashment on retirement (private sector) | ₹4,00,000 |
| Professional tax paid | ₹2,500 |
Assume average salary of the last ten months is ₹1,40,000, completed years of service are 22, and the notified gratuity limit is ₹20,00,000.
| Deduction under section 19(1) | Working | Amount |
|---|---|---|
| Serial 1 — professional tax | Entire amount | ₹2,500 |
| Serial 2 — standard deduction | Taxed under section 202(1), so ₹75,000 or salary, whichever is less | ₹75,000 |
| Serial 6 — other gratuity | Minimum of ₹9,00,000 actual, ₹20,00,000 notified limit, and ½ × ₹1,40,000 × 22 = ₹15,40,000 | ₹9,00,000 |
| Serial 14 — leave encashment | Minimum of the specified measures, subject to the A − B lifetime cap in sub-section (2)(f) | As computed, capped |
Had the same employee been taxed outside section 202(1), the standard deduction would have been ₹50,000 instead of ₹75,000 — a ₹25,000 difference in taxable salary before any other change. Note also that the gratuity deduction here is limited by the actual amount received, because the half-month formula produced a higher figure.
Compliance checklist and due dates
- Confirm which regime applies before fixing the standard deduction: ₹75,000 under section 202(1), ₹50,000 otherwise.
- For non-statutory gratuity, run all three limbs of serial 6 and take the lowest — actual, notified limit, and the half-month formula on the ten-month average salary.
- Track leave encashment claimed in earlier years; sub-section (2)(f) applies a lifetime cap of A − B, not a per-year cap.
- Do not claim the voluntary retirement deduction under serial 12 and relief under section 157 on the same amount — sub-section (2)(e)(iii) prohibits it.
- Voluntary retirement is capped at ₹5,00,000 and can be claimed only once across tax years.
- Employers should apply these deductions when estimating salary for tax deduction under section 392.
Common mistakes
- Applying the ₹75,000 standard deduction to a taxpayer who is not taxed under section 202(1). The higher figure is tied to that section.
- Treating the notified gratuity limit as the deduction. It is only one of three limbs; the lowest wins.
- Claiming leave encashment afresh in a later job without reducing by amounts already allowed. The formula A − B is cumulative across employers and years.
- Claiming both the section 19 voluntary retirement deduction and section 157 relief on the same receipt.
- Looking for these exemptions in the Schedules. Unlike most section 10 items, the salary retirement exclusions were moved into section 19, not into Schedules II to VII.
This is an explanatory guide, not tax advice, and it does not reproduce the section in full. Read the bare text of the section before you rely on it, and check for later amendments, the Income-tax Rules made under the new Act, and CBDT circulars and notifications.