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Deductions are like financial shortcuts, helping you reduce the amount of income that gets taxed. One key player in this money-saving game is the standard deduction. Instead of diving into the complexities of itemizing every expense, the standard deduction offers a straightforward way to reduce your taxable income. Salaried individuals can claim it without any investment. Let us read more and understand about standard deduction under the Income Tax Act.
You can refer to the complete section mapping of Income Tax Act 1961 vs Income Tax Act 2025 here.
The Standard Deduction on salary simplifies tax filing for salaried individuals by reducing taxable income by a fixed amount, thereby minimizing the overall tax burden. Unlike other deductions, it does not require any proof or disclosures, making it a hassle-free tax benefit.
In Budget 2024, Finance Minister Nirmala Sitharaman increased the Standard Deduction limit from ₹50,000 to ₹75,000. However, this increase applies only under the New Tax Regime, while the deduction remains unchanged at ₹50,000 in the Old Tax Regime. Also, standard deduction limit for family pensioners has been hiked to Rs 25,000 from Rs 15,000.
In Budget 2025, the government further eased the tax burden by increasing the income tax exemption limit to ₹12 lakh per year. With the Standard Deduction of ₹75,000, salaried employees will effectively not pay income tax up to ₹12.75 lakh.
The Standard Deduction remains one of the most widely applicable tax benefits, as it is available to all salaried individuals, regardless of their specific expenses or financial circumstances.
The Standard Deduction is available under both the Old Tax Regime and the New Tax Regime. However, an increase in the deduction limit was introduced in Budget 2024, but only under the New Tax Regime.
Here’s a breakdown of the Standard Deduction under each regime:
The purposes of introducing standard deduction are:
The standard deduction can be claimed by individuals receiving salary and pension, excluding business owners. However, for the following cases, the standard deduction will not be applicable:-
The standard deduction is a flat deduction of Rs. 50,000 under old tax regime and Rs. 75,000 under new tax regime on the taxable income of salaried employees and pensioners, irrespective of their earnings. This deduction is straightforward and does not require any evidence or proof of investment. It is provided to cover expenses that are not eligible for deductions under other sections of the Income Tax Act.
For example, if an individual earns a gross annual salary of ₹12,00,000 during the year and the standard deduction on salary in the new tax regime is ₹75,000, their taxable income will be ₹11,25,000. The total tax liability for the year is calculated on this amount, lowering the overall tax burden on the employee.
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The legal framework in India recognizes individuals aged between 60 and 80 years as senior citizens, a classification that comes with certain privileges and responsibilities. Specifically, a pension serves as a stipend or periodic allowance granted to individuals, especially senior citizens, in acknowledgment of their past service.
In alignment with the Indian Taxation System, the pension received by senior citizens from their former employers is considered taxable income and falls under the category of 'salaries.' This implies that senior citizens need to adhere to tax regulations applicable to salary income.
Section 16 of the Income Tax Act provides relief to pensioners by allowing them to claim a deduction of up to Rs. 50,000/ Rs. 75,000 per annum or the actual amount of the pension, whichever is less. This provision has a dual effect: it recognizes the financial challenges faced by senior citizens and provides a means to mitigate their tax liability.
Furthermore, the family pensioners can claim a standard deduction of Rs.25,000 from his/her family pension under the new tax regime. Earlier, this limit was Rs.15,000, which was increased to Rs.25,000 in Budget 2025.
| Particulars | Amount |
|---|---|
| Gross Salary Income | Rs 8 Lakh |
| Less: Standard Deduction (old regime) | Rs 50,000 |
| Net Salary Income or Gross Taxable Income | Rs 7.5 Lakh |
| Less: Deduction under Section 80C | Rs 1.5 Lakh |
| Net Taxable Income | Rs 6 Lakh |
| Particulars | Amount |
|---|---|
| Gross Salary Income | Rs 8 Lakh |
| Less: Standard Deduction (old regime) | Rs 75,000 |
| Net Salary Income or Gross Taxable Income | Rs 7.25 Lakh |
| Less: Deduction under Section 80C | zero |
| Net Taxable Income | Rs 7.25 Lakh |
The standard deduction is not available on the basis of no. of employers. The standard deduction on salary is the overall limit for a whole year rather than the no. of employers.
Let’s say Mr. A worked for 2 employers during the FY 2024-25. In this case, Mr. A will be able to claim a standard deduction of Rs.50,000 or Rs.75,000 since the total amount of deduction is not based on the no. of employers the taxpayer has worked with during the year.
Therefore, Mr. A can claim a standard deduction of the respective amount based on the choice of regime from the gross total income of the year.
Follow these simple steps to claim the standard deduction:
You can claim the standard deduction only if you have salary or pension income.
While filing your income tax return, select either the old tax regime or the new tax regime. The standard deduction is available in both.
Fill in your salary or pension income correctly in the ITR form.
Once salary or pension income is entered, the standard deduction is automatically applied in the ITR. No separate claim is required.
If you are salaried, check your Form 16 to confirm that the standard deduction has been included.
You do not need to upload any bills or proofs to claim the standard deduction.
While there is no need to produce any documents for claiming the standard deduction, you must produce the following documents at the time of income tax return filing. Also, it is mandatory to file an ITR to claim the benefit of a standard deduction.
The standard deduction was first introduced in 1974 to simplify tax calculations for salaried individuals. Over time, its limits and percentage have been revised multiple times to keep pace with changes in the tax landscape.
In 2005, Finance Minister P. Chidambaram removed the standard deduction, citing its redundancy in light of expanding income tax slabs and increased exemption limits. However, after a 13-year hiatus, the standard deduction was reinstated in Budget 2018 at ₹40,000.
In the following year, Budget 2019 raised the standard deduction to ₹50,000, benefiting salaried taxpayers. Initially unavailable under the new tax regime, the standard deduction was eventually allowed for individuals opting for the new tax scheme in Budget 2023, maintaining the ₹50,000 limit.
In Budget 2024, which increased the standard deduction under the new tax regime to ₹75,000, while the old tax regime continues to offer a ₹50,000 deduction.
Standard deduction is just one of the many deductions available under the Income Tax Act. However, taxes can be complex and can result in missing out on potential deductions. Taking help from experts can ensure you make the most of available deductions and maximize your tax savings. Get in touch with our tax experts and start planning your taxes today. Starting early ensures you maximize your tax savings. Connect today!
Yes, the standard deduction is available to all salaried taxpayers & pensioners, irrespective of their age.
The standard salary deduction is available irrespective of your salary amount. The benefit will be given to you if you have a salary income. The amount of salary is irrelevant in this case.
The standard deduction is a flat deduction for which no proof is required to be furnished by an employee to the employer/IT Department.
Income tax deduction generally means Deductions under chapter VIA (like deduction u/s 80C, 80D, etc.)
| Standard Deduction | Chapter VI-A Deduction like sections 80C, 80D, etc. |
|---|---|
| It is a flat deduction irrespective of the actual expenditure. | These deductions are available on the basis of the actual expenditure/investment. |
| This deduction is available only to individuals having income from salary. | These deductions are available from all sources of Income. |
| This deduction is allowed from salary income before arriving at Gross Total Income. | These deductions are allowed after calculating Gross Total Income. |
| The limit of the standard deduction is Rs. 50,000/- | Limit of deduction varies from section to section. Like u/s 80C, the limit is Rs. 1,50,000. |
Yes, an employee can claim both standard deductions & income tax deductions.
Section 16(ia) of the Income Tax Act deals with the standard deduction.
The standard deduction on salary, or salary deduction, is not calculated monthly. A flat deduction is allowed at the time of filing ITR for the assessment year.
Self-employed people don’t get a salary income. They have a business income. Hence, the standard deduction cannot be claimed by self-employed individuals since the standard deduction is available from salary income only.
Yes, the standard deduction is available to central or state government employees.
No, Standard deduction is only available from salary & pension income and not from Income from other sources.
Except for salaried individuals and pensioners, no one is allowed to claim a standard deduction. So, if you are a freelancer or a businessman, remember that you are not eligible for this deduction.
To claim the benefit of the standard deduction, it is not mandatory to have it mentioned in your pay scale or payslip. You can directly take the benefit at the time of e-filing. The benefit of the standard deduction is also available in Form-16 if you have opted for the Old Tax Regime or the New Regime.
If you have a payslip with the deductions mentioned, then this means you are eligible to claim exemption of the same from your salary income in respect of various allowances and perquisites, etc.
You can claim deductions at the time of filing your Income Tax Return if the same is not accounted for by the employer, provided you are eligible to claim the deduction.
Standard deduction means a flat deduction to individuals earning salary or pension income if they have opted for the Old Tax Regime. It was introduced back in Budget 2018 in lieu of exemption of transport allowance and reimbursement of miscellaneous medical expenses. For FY 2024-25, the limit of standard deduction is Rs.75,000
Standard Deduction is a flat deduction amounting to Rs. 75,000 and is available without any receipt or any documentary proof.
No. Standard Deduction of Rs. 75,000/- is over and above the limit of 1,50,000 under section 80C.
The standard deduction is allowed while computing income chargeable under the head salaries. It is available to all class of employees irrespective of the nature of employer. Standard Deduction is also available to pensioners. Amount of Standard Deduction is Rs. 75,000 or amount of salary/pension, whichever is lower.
Note 1: The standard deduction under section 16(ia) is available only for Pension Chargeable under the head Income under the head Salaries and not for Pension chargeable under Income from Other Sources.
Note 2: The standard deduction for employees paying tax under the new tax regime under section 115BAC is increased from Rs. 50,000 to Rs. 75,000 w.e.f. Assessment Year 2025-26.
Section 16(ia) has been introduced by Finance Act, 2018 for class of person whose income is chargeable to tax under head salary. Family Pension is taxable under the head income from other sources. Hence standard deduction is not applicable in case of Family Pension.
Standard deduction is allowable to the extent of :
a) Rs. 50,000 or
b) Amount of Salary, whichever is lower
In this case standard deduction of Rs. 50,000 is allowable to Mr.X.
However, a higher standard deduction of Rs. 75,000 is available if Mr. X chooses the default tax regime available under section 115BAC
