What is Standard Deduction?#
Standard Deduction is a flat, automatic deduction from salary or pension income that every salaried employee and pensioner is entitled to — with no need to provide receipts, invoices, or proof of expenditure. It reduces your gross salary before tax computation.
Standard Deduction Amount (AY 2026-27)#
| Regime | Standard Deduction |
|---|---|
| New Tax Regime | ₹75,000 (enhanced by Budget 2024) |
| Old Tax Regime | ₹50,000 |
The standard deduction was increased from ₹50,000 to ₹75,000 under the New Tax Regime effective FY 2024-25.
Who is Eligible?#
✅ Salaried employees — receiving salary from an employer ✅ Pensioners — receiving pension from a former employer ❌ Self-employed / business owners — not eligible ❌ Retired persons receiving pension from annuity plans (not employer pension)
How Standard Deduction Works#
Standard deduction is directly deducted from your gross salary:
Gross Salary: ₹10,00,000
Standard Deduction: ₹75,000 (New Regime)
Net Salary Income: ₹9,25,000
Your employer computes this automatically in Form 16. You don't need to claim it separately in your ITR — it's pre-applied.
Standard Deduction vs Professional Tax#
In addition to standard deduction, professional tax paid to the state government is also fully deductible from salary income. Both apply together.
Gross Salary: ₹10,00,000
Less: Standard Deduction: ₹75,000
Less: Professional Tax: ₹2,400
Net Salary Income: ₹9,22,600
Standard Deduction for Family Pension#
If you receive family pension (after the death of an employee pensioner), you can claim:
- Standard deduction of ₹15,000 or 1/3rd of family pension (whichever is lower)
- This is separate from the main standard deduction for employees
History of Standard Deduction#
| Year | Amount |
|---|---|
| FY 2018-19 | ₹40,000 (reintroduced) |
| FY 2019-20 | ₹50,000 |
| FY 2024-25 (New Regime) | ₹75,000 |
The standard deduction replaced the previous transport allowance (₹19,200/year) and medical reimbursement (₹15,000/year) exemptions.
Tax Saving from Standard Deduction#
| Tax Slab | Tax Saved (on ₹75,000) |
|---|---|
| 5% | ₹3,750 |
| 10% | ₹7,500 |
| 15% | ₹11,250 |
| 20% | ₹15,000 |
| 30% | ₹22,500 |