Key Takeaways
- Standard deduction for salaried employees and pensioners is ₹75,000 under the new tax regime (Section 115BAC) for AY 2026-27.
- Under the old tax regime, the standard deduction remains ₹50,000.
- No bills, receipts, or investment proof is required to claim the standard deduction.
- Combined with the Section 87A rebate, salaried employees earning up to ₹12,75,000 pay zero income tax under the new regime.
- The increase from ₹50,000 to ₹75,000 was introduced by the Finance (No. 2) Act, 2024 and applies from AY 2025-26 onwards.
What is the standard deduction for salaried employees in AY 2026-27? The standard deduction for AY 2026-27 is ₹75,000 under the new tax regime (Section 115BAC) and ₹50,000 under the old tax regime. This flat deduction under Section 16(ia) of the Income Tax Act is available to all salaried individuals and pensioners without requiring any receipts or proof of expenditure (Finance (No. 2) Act, 2024; incometax.gov.in AY 2026-27 tax guide).
Every salaried taxpayer in India is entitled to the standard deduction, a flat amount subtracted from gross salary before tax is calculated. For AY 2026-27 (FY 2025-26), the amount depends on which tax regime you choose. This post covers the exact deduction under each regime, who can claim it, how it interacts with the Section 87A rebate, and worked examples showing the actual tax impact.
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Standard Deduction: New Regime vs Old Regime
The Finance (No. 2) Act, 2024 increased the standard deduction under the new tax regime from ₹50,000 to ₹75,000, effective from AY 2025-26 onwards. The old regime deduction was left unchanged at ₹50,000.
| Parameter | New Tax Regime (Section 115BAC) | Old Tax Regime |
|---|---|---|
| Standard deduction (salary) | ₹75,000 | ₹50,000 |
| Family pension deduction (Section 57(iia)) | ₹25,000 | ₹15,000 |
| Applicable from | AY 2025-26 onwards | AY 2019-20 onwards |
| Proof required | No | No |
| Legislative reference | Section 16(ia) as amended by Finance (No. 2) Act, 2024 | Section 16(ia), Finance Act 2018 |
The standard deduction is the lower of ₹75,000 (new regime) or ₹50,000 (old regime) and the actual salary received. If your salary is ₹40,000 for the year, your standard deduction is ₹40,000, not the full amount.
The new tax regime is the default for all individual taxpayers from AY 2024-25 onwards. Unless you explicitly opt out, the ₹75,000 deduction applies automatically.
Who Can Claim the Standard Deduction
The standard deduction under Section 16(ia) is available to:
- Salaried employees receiving salary or wages from an employer (government or private).
- Pensioners receiving pension from a former employer. Pension is taxed under the head "Salaries," so the same deduction applies.
It is not available to:
- Self-employed professionals or business owners (income under "Profits and Gains of Business or Profession").
- Individuals receiving only family pension. Family pension is taxed under "Income from Other Sources" and qualifies for a separate deduction of ₹25,000 (new regime) or ₹15,000 (old regime) under Section 57(iia), not the standard deduction.
If you have salary income from multiple employers in the same year, the total standard deduction across all employers is capped at ₹75,000 (new regime) or ₹50,000 (old regime). You cannot claim ₹75,000 from each employer separately.
How ₹75,000 Makes Salary Up to ₹12.75 Lakh Tax-Free
Under the new tax regime, the Section 87A rebate eliminates tax for individuals with total income up to ₹12,00,000 (Finance Act 2025). For salaried employees, the standard deduction of ₹75,000 pushes this threshold higher:
Gross salary up to ₹12,75,000 = Taxable income of ₹12,00,000 after standard deduction = Full rebate under Section 87A = Zero tax
Here is a step-by-step calculation:
| Step | Amount |
|---|---|
| Gross salary | ₹12,75,000 |
| Less: Standard deduction | ₹75,000 |
| Total taxable income | ₹12,00,000 |
| Tax on ₹12,00,000 (new regime slabs) | ₹60,000 |
| Less: Section 87A rebate | ₹60,000 |
| Tax payable | ₹0 |
The new regime slab rates for AY 2026-27 (Finance Act 2025; PIB Press Release, February 1, 2025):
| Taxable Income | Tax Rate |
|---|---|
| Up to ₹4,00,000 | Nil |
| ₹4,00,001 to ₹8,00,000 | 5% |
| ₹8,00,001 to ₹12,00,000 | 10% |
| ₹12,00,001 to ₹16,00,000 | 15% |
| ₹16,00,001 to ₹20,00,000 | 20% |
| ₹20,00,001 to ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
Marginal relief applies if your taxable income is slightly above ₹12 lakh. The tax payable is capped so that it does not exceed the amount by which your income exceeds ₹12,00,000.
Worked Example: Tax Savings from the ₹25,000 Increase
Consider a salaried employee with gross salary of ₹15,00,000.
Under the new regime (₹75,000 standard deduction):
| Step | Amount |
|---|---|
| Gross salary | ₹15,00,000 |
| Less: Standard deduction | ₹75,000 |
| Taxable income | ₹14,25,000 |
| Tax: ₹0 on first ₹4L + ₹20,000 on ₹4-8L + ₹40,000 on ₹8-12L + ₹33,750 on ₹12-14.25L | ₹93,750 |
| Add: 4% health and education cess | ₹3,750 |
| Total tax | ₹97,500 |
If standard deduction were still ₹50,000 (old amount):
| Step | Amount |
|---|---|
| Taxable income | ₹14,50,000 |
| Tax: ₹0 + ₹20,000 + ₹40,000 + ₹37,500 | ₹97,500 |
| Add: 4% cess | ₹3,900 |
| Total tax | ₹1,01,400 |
Annual saving from the ₹25,000 increase: ₹3,900. At the 15% slab, the marginal benefit is ₹3,750 + cess. For taxpayers in the 30% bracket (income above ₹24 lakh), the saving is ₹7,800 (₹25,000 x 30% + 4% cess).
How to Claim the Standard Deduction in Your ITR
The standard deduction is pre-filled in the ITR utility for salaried taxpayers. You do not need to provide any supporting documents.
- When filing ITR-1 (Sahaj) or ITR-2, enter your gross salary under "Income from Salary."
- The standard deduction of ₹75,000 (new regime) or ₹50,000 (old regime) is auto-calculated in the "Deductions under Section 16" field.
- Verify that the deduction matches your Form 16 Part B, where your employer would have already applied the standard deduction while computing tax.
- If you switched jobs during the year, ensure the combined salary from all Form 16s is entered, and the total standard deduction does not exceed the limit.
No separate claim form or receipt upload is required.
Common Mistakes to Avoid
-
Claiming ₹75,000 in the old regime. The ₹75,000 amount applies only under the new tax regime. If you opt for the old regime, your standard deduction is ₹50,000. Filing the wrong amount will trigger a defective return notice under Section 139(9).
-
Confusing standard deduction with family pension deduction. Family pension (received by a deceased employee's family member) is not salary. It qualifies for a separate deduction of ₹25,000 (new regime) or ₹15,000 (old regime) under Section 57(iia), not the ₹75,000 standard deduction.
-
Double-counting across employers. If you had two employers during the year and each applied the standard deduction, you must ensure the total deduction in your ITR does not exceed ₹75,000. The excess must be added back to your taxable income.
Tax Garden Files Your ITR With the Right Deductions
Choosing between the old and new regime, applying the correct standard deduction, and verifying Form 16 entries takes time. Tax Garden's ITR filing service handles this end-to-end: we pick the regime that saves you more, apply all eligible deductions including the ₹75,000 standard deduction, and file your return before the deadline. See our pricing for flat-fee plans. For context on which regime saves you more, see the old vs new tax regime comparison for AY 2026-27.
