Standard deduction is a flat amount deducted from salary or pension income before tax is worked out, with no bills or proof needed. For FY 2025-26 and tax year 2026-27 it is ₹75,000 in the new tax regime and ₹50,000 in the old tax regime, for every salaried employee and every pensioner who gets pension from a former employer. This guide explains what standard deduction is, who can claim it, the section under the old and new Income-tax Acts, pensioners and family pension, how much tax it saves, and common mistakes, with worked examples.
Quick answer: standard deduction is ₹75,000 (new regime) or ₹50,000 (old regime), or your salary if that is lower. It is allowed once a year, even if you had two employers. Pensioners get it on pension from a former employer. Family pension gets a different deduction: one-third of the pension, capped at ₹25,000 (new) or ₹15,000 (old). With it, salary up to ₹12.75 lakh pays no tax in the new regime for FY 2025-26.
What Is Standard Deduction in Income Tax?
Standard deduction is a fixed deduction from income under the head "Salaries". Unlike HRA or Section 80C, you don't spend or invest anything to get it, and you don't submit proof. Your employer applies it when calculating TDS, it appears in Form 16, and the ITR form applies it automatically.
- Up to FY 2025-26: Section 16(ia) of the Income-tax Act, 1961.
- From tax year 2026-27: Section 19 of the Income-tax Act, 2025. The amounts stay the same: ₹75,000 where tax is computed under the new regime (Section 202(1)) and ₹50,000 in any other case, or the salary if lower.
Budget 2026 did not change the slabs or the standard deduction, so the same figures apply to salary earned from 1 April 2026.
Standard Deduction Amount: New vs Old Regime
| Item | New regime | Old regime |
|---|---|---|
| Standard deduction (salary and employer pension) | ₹75,000 | ₹50,000 |
| Family pension deduction | One-third of pension, max ₹25,000 | One-third of pension, max ₹15,000 |
| Professional tax (Section 16(iii) / 19) | Not allowed | Actual paid (max ₹2,500) |
| Entertainment allowance (govt employees) | Not allowed | Least of ₹5,000, 20% of basic, or actual |
| HRA, LTA, 80C, 80D, home loan interest | Not allowed | Allowed |
The new regime is the default. The ₹75,000 applies to everyone in the new regime, whatever their income. It is not limited to incomes above ₹15.5 lakh, a common error in older articles.
History of Standard Deduction in India
| Financial year | Old regime | New regime | What changed |
|---|---|---|---|
| Up to 2004-05 | Allowed (old Section 16(i)) | — | Removed by the Finance Act, 2005 |
| 2018-19 | ₹40,000 | — | Reintroduced in place of transport allowance (₹19,200) and medical reimbursement (₹15,000) |
| 2019-20 to 2022-23 | ₹50,000 | Not allowed (new regime from 2020-21) | Raised to ₹50,000 in the Interim Budget 2019 |
| 2023-24 | ₹50,000 | ₹50,000 | Extended to the new regime by the Finance Act, 2023 |
| 2024-25 onwards | ₹50,000 | ₹75,000 | Raised for the new regime by the Finance (No. 2) Act, 2024 |
Who Can Claim Standard Deduction?
| Taxpayer | Standard deduction? |
|---|---|
| Salaried employees (private, government, PSU, part-time, contract on payroll) | Yes |
| Pensioners getting pension from a former employer (central, state, PSU, private) | Yes, pension is taxed as salary |
| Senior and super senior citizens with salary or pension | Yes, same amount |
| Family pensioners (pension after the employee's death) | No, but a separate family pension deduction applies |
| Annuity from an insurer or NPS annuity | No, taxed under "Other sources" |
| Freelancers, consultants, business owners | No, they claim business expenses or presumptive taxation instead |
| Only interest, rent or capital gains income | No |
How Much Tax Does Standard Deduction Save?
The saving equals the deduction multiplied by your slab rate, plus 4% cess. For FY 2025-26:
| Gross salary | Regime | Tax without standard deduction | Tax with standard deduction | Saving |
|---|---|---|---|---|
| ₹12,75,000 | New | ₹74,100 | Nil (taxable ₹12,00,000) | ₹74,100 |
| ₹15,00,000 | New | ₹1,09,200 | ₹97,500 | ₹11,700 |
| ₹20,00,000 | New | ₹2,08,000 | ₹1,92,400 | ₹15,600 |
| ₹10,00,000 | Old (no other deductions) | ₹1,17,000 | ₹1,06,600 | ₹10,400 |
| ₹15,00,000 | Old (no other deductions) | ₹2,73,000 | ₹2,57,400 | ₹15,600 |
The maximum saving is ₹23,400 in the new regime (₹75,000 at 30% plus cess) and ₹15,600 in the old regime. The biggest effect is at the rebate limit: in the new regime, the ₹75,000 standard deduction and the ₹60,000 Section 87A rebate together make salary up to ₹12.75 lakh tax-free. Check your own figure with the income tax calculator.
Standard Deduction for Pensioners and Senior Citizens
Pension from a former employer is taxed under "Salaries", so retired employees get the same ₹75,000 (new) or ₹50,000 (old). Commuted pension of government employees is fully exempt, and for others it is partly exempt, so standard deduction is mainly used against the monthly (uncommuted) pension.
Example: pensioner aged 65, FY 2025-26. Pension ₹8,00,000, FD interest ₹1,00,000, health insurance ₹50,000.
| Particulars | New regime | Old regime |
|---|---|---|
| Pension + interest | ₹9,00,000 | ₹9,00,000 |
| Standard deduction | ₹75,000 | ₹50,000 |
| 80TTB (interest) and 80D (health insurance) | Not allowed | ₹50,000 + ₹50,000 |
| Taxable income | ₹8,25,000 | ₹7,50,000 |
| Tax payable | Nil (87A rebate) | ₹62,400 |
So for most pensioners with income up to about ₹12.75 lakh, the new regime is better even after losing 80TTB and 80D. Pensioners aged 75 or more who have only pension and interest from the same specified bank can give a declaration to the bank, which deducts the tax, and then need not file a return (Section 194P, FY 2025-26).
Family Pension Deduction
Family pension, paid to a family member after an employee's death, is taxed under "Income from other sources", not salary. It does not get the ₹75,000 or ₹50,000. Instead, there is a deduction of one-third of the family pension, capped at:
- ₹25,000 in the new regime (from FY 2024-25);
- ₹15,000 in the old regime.
This was Section 57(iia) of the 1961 Act and is Section 93(1)(d) of the 2025 Act. Example: family pension of ₹3,00,000 gets a deduction of ₹25,000 (new) or ₹15,000 (old). If the person also draws their own pension or salary, they get the standard deduction on that as well.
How to Claim Standard Deduction
- Salary: your employer deducts it when computing TDS. Check that it appears under "Deductions under section 16" in Form 16 Part B.
- Pension: the bank or pension office applies it when deducting TDS. Report pension under "Salaries" in the ITR.
- ITR: in ITR-1 or ITR-2, enter gross salary; the form fills ₹75,000 or ₹50,000 based on the regime you choose. You don't upload any proof.
- Two employers: claim it only once in the ITR, even if both Form 16s show it.
Read our Form 16 guide to see where it appears in Part B, or use the Form 16 Excel format to work through the full calculation.
Common Mistakes with Standard Deduction
- Claiming it twice after a job change. Each employer may give ₹75,000, but you can claim only ₹75,000 in total. The extra is disallowed and you may get a demand. See our TDS mismatch notice guide.
- Thinking ₹75,000 is only for high earners. In the new regime it applies to every salaried person and pensioner.
- Claiming it on family pension. Family pension gets the one-third / ₹25,000 / ₹15,000 deduction instead.
- Claiming it on freelance or consulting income. It applies only to salary and employer pension.
- Claiming more than the salary. If salary is ₹40,000, the deduction is ₹40,000, not ₹75,000.
- Treating it as an allowance in the payslip. It is not paid to you; it only reduces taxable income.
Standard Deduction and Choosing a Regime
The new regime gives ₹25,000 more standard deduction and lower slabs, but no HRA, 80C, 80D or home loan interest. The old regime is better only when those deductions are large. Compare both with your actual figures before choosing: see old vs new tax regime with examples, and work out HRA with the HRA exemption calculator. To see how your employer spreads TDS across the year, use the TDS on salary calculator.
For the official text, see the Income Tax Department website.
Frequently Asked Questions
What is standard deduction in income tax?
A flat deduction from salary or employer pension income, allowed without any proof: ₹75,000 in the new regime and ₹50,000 in the old regime for FY 2025-26 and tax year 2026-27.
Is standard deduction ₹75,000 for everyone in the new regime?
Yes. Every salaried employee and pensioner in the new regime gets ₹75,000 (or the salary, if lower). There is no income condition.
What is the standard deduction in the old tax regime?
₹50,000, along with HRA, 80C, 80D, professional tax and other old-regime deductions.
Under which section is standard deduction allowed?
Section 16(ia) of the Income-tax Act, 1961 up to FY 2025-26, and Section 19 of the Income-tax Act, 2025 from tax year 2026-27.
Can pensioners claim standard deduction?
Yes, on pension received from a former employer, because it is taxed as salary: ₹75,000 (new) or ₹50,000 (old). It is not available on annuity from an insurer.
Is standard deduction available on family pension?
No. Family pension gets a separate deduction of one-third of the pension, capped at ₹25,000 in the new regime and ₹15,000 in the old regime.
Can I claim standard deduction twice if I had two employers?
No. It is allowed once per person per year. If both Form 16s show it, claim only one in the ITR.
Can freelancers or self-employed people claim it?
No. It applies only to salary and employer pension. Freelancers claim business expenses or use presumptive taxation.
Up to what salary is there no tax with standard deduction?
In the new regime for FY 2025-26, salary up to ₹12.75 lakh: ₹75,000 standard deduction brings taxable income to ₹12 lakh, and the Section 87A rebate makes the tax nil.
Do I need proof to claim standard deduction?
No. It is applied automatically by the employer and in the ITR form, with no bills or documents.