Key Highlights
- Standard Deduction of ₹75,000 available under Section 16 of ITA 2025
- Available under both New and Old Tax Regimes for salaried individuals
- Also available for pensioners (pension = salary head)
- No proof, no investment, no receipts needed — purely flat deduction
- Family pension deduction: 1/3rd of pension received or ₹25,000, whichever is lower
- For new regime: effective zero-tax limit for salaried = ₹12,75,000 (₹12L + ₹75K standard deduction)
- Available to Resident and Non-Resident salaried individuals in India
1. Overview
The standard deduction is a flat deduction from salary income that every salaried employee gets automatically — no investment required, no bills to submit, no conditions to satisfy. It was originally abolished in 2005 and reintroduced in 2018. Since its reintroduction, it has been progressively increased from ₹40,000 (2018-19) to ₹50,000 (2019-20 onwards) and then to ₹75,000 under the Finance Act 2024 for those in the new tax regime.
Under the Income Tax Act, 2025, the standard deduction is codified under Section 16, and it is one of the very few deductions available in the New Tax Regime — making it extremely valuable for the 6+ crore salaried taxpayers in India.
2. What is Standard Deduction?
Standard Deduction is a flat-rate deduction allowed from gross salary income before computing income tax. It is a recognition by the government that employees incur various expenses related to their employment — commuting, professional development, clothing, equipment — which are difficult to track individually.
Instead of asking employees to produce receipts for every employment-related expense, the Income Tax Act simply allows a fixed flat deduction. You do not need to have actually spent ₹75,000 on anything — it is an automatic deduction for every person who earns a salary.
3. Standard Deduction Under Section 16 of ITA 2025
| Category | Standard Deduction Amount | Regime |
|---|---|---|
| Salaried Employee / Pensioner | ₹75,000 per year | New Tax Regime (Section 202) |
| Salaried Employee / Pensioner | ₹50,000 per year | Old Tax Regime |
| Family Pension (Section 57) | 1/3rd of pension or ₹25,000 (whichever is lower) | Both regimes |
4. Who Can Claim Standard Deduction?
- Salaried Employees: Every individual receiving salary income from an employer — whether private sector, public sector, or government
- Pensioners: Former government and private sector employees receiving pension — since pension is taxed under the salary head
- Multiple employers: Even if you work for two employers in the same year, the total standard deduction is capped at ₹75,000 (not ₹75,000 per employer)
- NRIs: Also eligible for standard deduction if receiving salary income in India
5. Who Cannot Claim Standard Deduction?
- Self-employed professionals (doctors, lawyers, consultants)
- Business owners
- Freelancers (unless receiving salary from a company)
- Persons earning commission income
- Family pensioners (they get 1/3rd or ₹25,000 under Section 57 instead)
6. How Standard Deduction Saves Tax: Calculation
All examples below are illustrative only.
Example — Salaried Professional, ₹12,75,000 Gross Salary (New Regime):
| Particulars | Amount (₹) |
|---|---|
| Gross Salary | 12,75,000 |
| Less: Standard Deduction (Section 16) | (75,000) |
| Net Taxable Salary | 12,00,000 |
| Tax on ₹12,00,000 | 60,000 |
| Less: Section 157 Rebate | (60,000) |
| Final Tax Payable | ₹0 |
Without the standard deduction, the taxable income would be ₹12,75,000, and the tax (before rebate, but rebate not available as income > ₹12L) would be ₹78,750 + cess = ₹81,900. The ₹75,000 standard deduction saves this employee ₹81,900 in tax.
7. Family Pension Deduction Under Section 57
When the breadwinner of a family dies and the surviving family member receives a family pension, this is not treated as "salary" — it is taxable under the head "Income from Other Sources." The standard deduction of ₹75,000 is therefore not available for family pension.
However, Section 57(iia) of ITA 2025 provides a specific deduction for family pension of the lower of:
- 1/3rd of the family pension received, OR
- ₹25,000
Example (Illustrative only): Family pension received = ₹90,000. Deduction = lower of ₹30,000 (1/3rd) or ₹25,000 = ₹25,000. Taxable family pension = ₹65,000.
8. Standard Deduction in Multiple Employment Situations
If a salaried individual works for two different employers during the same Tax Year (e.g., changes job midyear), the standard deduction of ₹75,000 is available only once — not once for each employer. Both Form 16s should reflect the combined salary, and only one ₹75,000 standard deduction should be claimed in the ITR.
9. Standard Deduction for Retired Central/State Government Employees
Government pensioners receiving their pension through a bank or treasury are entitled to the standard deduction of ₹75,000 (new regime) or ₹50,000 (old regime) since their pension is classified as salary income under Section 15 of ITA 2025. This was confirmed by multiple CBDT circulars and has been retained under the new Act.
10. How Employer Reflects Standard Deduction in Form 16
Your employer automatically accounts for the standard deduction while computing TDS on salary. When you receive Form 16, you will see:
- Gross Salary (Part B of Form 16)
- Less: Standard Deduction under Section 16(ia) — ₹75,000 (new regime) or ₹50,000 (old regime)
- Net Salary for TDS computation
You simply need to verify this is correctly reflected before filing your ITR.
11. Latest Updates & Amendments
- Finance Act 2024: Standard deduction increased from ₹50,000 to ₹75,000 for taxpayers in new regime — effective from Tax Year 2024-25
- ITA 2025: Standard deduction continues at ₹75,000 (new regime) and ₹50,000 (old regime) under Section 16
- Tax Year 2026-27: No change in standard deduction amount — ₹75,000 for new regime
- Family pension deduction enhanced from ₹15,000 to ₹25,000 under Finance Act 2024 — carried into Section 57 of ITA 2025
12. Why TaxClue
While the standard deduction is straightforward, ensuring it is correctly reflected in your Form 16, ITR, and TDS computation is important. TaxClue assists salaried individuals and pensioners with ITR filing, Form 16 verification, and optimal regime selection to maximise the standard deduction benefit. Contact us for end-to-end salaried ITR support.
13. Resources & Checklist
- ☐ Verify standard deduction is ₹75,000 (new regime) or ₹50,000 (old regime) in Form 16
- ☐ If receiving pension — confirm it is classified under salary head in Form 16
- ☐ If receiving family pension — claim ₹25,000 deduction under Section 57 in ITR
- ☐ If changing jobs — inform new employer of standard deduction already claimed
- ☐ File ITR by 31 July 2027 for Tax Year 2026-27
14. Contact Us
Every salaried employee in India is entitled to the ₹75,000 standard deduction — automatically, without paperwork. Make sure you are claiming it correctly. Contact us to file your ITR for Tax Year 2026-27 and ensure all deductions are correctly applied.