Standard Deduction ₹75,000 in New Tax Regime: Complete Guide

Standard Deduction for AY 2026-27: Rs. 75,000 (New Regime)

Standard deduction amount: Rs. 75,000 (new regime), Rs. 50,000 (old regime)

Eligibility: Salaried employees and pensioners only (Section 16(ia), Income Tax Act 1961)

Combined with Section 87A rebate: Salary up to Rs. 12,75,000 is completely tax-free under the new regime

How it works: Automatic deduction with no receipts/bills needed. Applies to salary from one or multiple employers (capped at Rs. 75,000 total). The standard deduction of Rs. 75,000 reduces your taxable income, so a Rs. 12 lakh salary becomes Rs. 11.25 lakh taxable income, on which the slab tax of Rs. 52,500 is fully covered by the Section 87A rebate (maximum Rs. 60,000), resulting in zero tax.

Authoritative Source: Finance (No. 2) Act 2024; Section 16(ia), Income Tax Act 1961; Section 115BAC (new regime); PIB Press Release PRID/2098406, February 1, 2025

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 guide 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. Combined, these two provisions eliminate income tax for salaried employees earning up to ₹12.75 lakh. This makes standard deduction the single most important tax saving available to salaried earners in the new tax regime.

Standard Deduction: New Regime vs Old Regime

The Finance (No. 2) Act, 2024 increased the standard deduction under the new tax regime from Rs. 50,000 to Rs. 75,000, effective from AY 2025-26 onwards. The old regime deduction was left unchanged at Rs. 50,000.

The standard deduction is the lower of Rs. 75,000 (new regime) or Rs. 50,000 (old regime) and the actual salary received. If your salary is Rs. 40,000 for the year, your standard deduction is Rs. 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 Rs. 75,000 deduction applies automatically.

What Changed for FY 2026-27 (Income-tax Act 2025)

The Income-tax Act 2025 came into force on April 1, 2026 and replaced the Income Tax Act 1961. For salaried taxpayers the change is mostly in labels, not amounts:

Budget 2026 did not change the new regime slabs or the standard deduction for FY 2026-27, so every calculation on this page applies to both years. See the income tax slab rates for FY 2026-27 and our explainer on the Tax Year concept under the Income-tax Act 2025.

The returns you file in 2026 (for FY 2025-26) still cite Section 16(ia) and Section 115BAC. New section numbers appear on returns filed in 2027 for Tax Year 2026-27.

Who Can Claim the Standard Deduction

The standard deduction under Section 16(ia) is available to:

1. Salaried employees receiving salary or wages from an employer (government or private).
2. 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"). These individuals can claim actual business expenses or use presumptive income schemes.
• Individuals receiving only family pension. Family pension is taxed under "Income from Other Sources" and qualifies for a separate deduction of Rs. 25,000 (new regime) or Rs. 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 Rs. 75,000 (new regime) or Rs. 50,000 (old regime). You cannot claim Rs. 75,000 from each employer separately.

How Rs. 75,000 Makes Salary Up to Rs. 12.75 Lakh Tax-Free

Tax Rate Chart

New Tax Regime Slab Rates : AY 2026-27

Finance Act 2025 slab structure applicable to salaried individuals after standard deduction

Up to Rs. 4,00,000

Zero tax

Nil

Rs. 4,00,001 : Rs. 8,00,000

Rs. 20,000 max in this band

5%

Rs. 8,00,001 : Rs. 12,00,000

Rs. 40,000 max in this band

10%

Rs. 12,00,001 : Rs. 16,00,000

Section 87A rebate covers up to Rs. 12L

15%

Rs. 16,00,001 : Rs. 20,00,000

20%

Rs. 20,00,001 : Rs. 24,00,000

25%

Above Rs. 24,00,000

Peak slab; Rs. 75K deduction saves Rs. 23,400 incl. cess

30%

Source: Finance Act 2025; PIB Press Release Feb 1, 2025; Section 115BAC, Income Tax Act

Quick Tax Savings Calculator

How much the Rs. 75,000 deduction saves at each salary level (new regime, before 4% cess):

Bottom line: Up to Rs. 12 lakh of salary, the Section 87A rebate already makes tax zero, so the deduction changes nothing. Its biggest impact is between Rs. 12 lakh and Rs. 12.75 lakh, where it keeps taxable income within the Rs. 12 lakh rebate limit. Above that, it saves 15% to 30% of Rs. 75,000 (Rs. 11,250 to Rs. 22,500 before cess) depending on your top slab.

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Under the new tax regime, the Section 87A rebate eliminates tax for individuals with total income up to Rs. 12,00,000 (Finance Act 2025). The combination of Rs. 75,000 standard deduction plus Section 87A rebate is the most powerful tax relief for salaried employees. For salaried employees, the standard deduction of Rs. 75,000 pushes this threshold higher:

Gross salary up to Rs. 12,75,000 = Taxable income of Rs. 12,00,000 after standard deduction = Full rebate under Section 87A = Zero tax

Here is a step-by-step calculation:

The new regime slab rates for AY 2026-27 (Finance Act 2025; PIB Press Release, February 1, 2025):

Marginal relief applies if your taxable income is slightly above Rs. 12 lakh. The tax payable is capped so that it does not exceed the amount by which your income exceeds Rs. 12,00,000.

Worked Examples: Standard Deduction Across Salary Levels

Example 1: Rs. 8 Lakh Salary (Section 87A Full Benefit)

A salaried employee earning Rs. 8,00,000 gross salary, filing under new regime:

Key point: At Rs. 8 lakh the Section 87A rebate alone would make tax zero, with or without the standard deduction. Cess is charged only on tax left after the rebate.

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Example 2: Rs. 12 Lakh Salary (Near Rebate Threshold)

Salaried employee earning Rs. 12,00,000:

Salary up to Rs. 12.75L qualifies for full Section 87A rebate because taxable income (after Rs. 75K deduction) doesn't exceed Rs. 12L.

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Example 3: Rs. 15 Lakh Salary (No Rebate)

Salaried employee earning Rs. 15,00,000:

Once taxable income crosses Rs. 12 lakh (beyond the marginal relief range of about Rs. 12,70,588), the Section 87A rebate is lost entirely. The Rs. 75K standard deduction still saves Rs. 11,700 here (Rs. 75,000 at 15% plus cess).

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Example 4: Rs. 25 Lakh Salary (High Income, 30% Slab)

Salaried employee earning Rs. 25,00,000:

At the 30% bracket, every Rs. 1 of standard deduction saves Rs. 0.30 + cess.

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How Standard Deduction Interacts With Other Income

Salary + House Property Income

Standard deduction applies only to salary under Section 16(ia). If you earn salary plus house property income:

House property income is added to salary income after deducting the standard deduction. Under the new regime, the 30% standard deduction on rent (Section 24(a)) and interest on a loan for a let-out property are allowed against that property's income, but interest on a self-occupied home is not deductible, and a house property loss cannot be set off against salary.

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Salary + Rental Income (Deemed Lease Agreement)

If you receive rental income from a residential property you own:

Rental income is taxed under "Income from House Property" and does not qualify for standard deduction. The 30% deduction on rental income is available under both regimes.

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Salary + Capital Gains (Stock Sales, Crypto)

Capital gains from listed shares and equity funds are taxed at special rates based on holding period:

Capital gains count towards the Rs. 12 lakh rebate limit, and under the new regime the rebate cannot offset tax on STCG (Section 111A) or LTCG (Section 112A). Crypto (virtual digital assets) is taxed at a flat 30% under Section 115BBH, with no deduction other than the cost of acquisition. The Rs. 75K standard deduction applies to salary income only.

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.

ITR-1 (Sahaj) and ITR-2: Where the Standard Deduction Goes

1. Enter gross salary once, for all employers.

   • Collect Form 16 Part B from every employer you worked for during the year.
   • In ITR-1, salary is reported under Gross Total Income, in the Salary / Pension block. In ITR-2 it goes in Schedule S (Details of Income from Salary), with one entry per employer.
   • Example: If you worked at Employer A from April to December earning Rs. 8,50,000 and at Employer B from January to March earning Rs. 1,50,000, total gross salary is Rs. 10,00,000.

2. Check the line "Deductions u/s 16".

   • This block has three items: standard deduction under Section 16(ia), entertainment allowance under Section 16(ii) for government employees, and professional tax under Section 16(iii). Entertainment allowance and professional tax are allowed only in the old regime.
   • The online utility computes the standard deduction for you: Rs. 75,000 in the new regime (Finance (No. 2) Act, 2024) and Rs. 50,000 in the old regime.
   • The deduction is capped at actual salary received. If you earned only Rs. 40,000 in the year, the deduction is Rs. 40,000.
   • With two employers, confirm the deduction appears once. The maximum is Rs. 75,000 (new) or Rs. 50,000 (old) for the year, not per employer.

3. Confirm "Income chargeable under the head Salaries".

   • This is gross salary, less exempt allowances, less the Section 16 deductions. It should match your own working.
   • TDS is not subtracted here. It is entered in the TDS schedule from Form 16 and Form 26AS, and credited against your final tax liability.

4. Check the regime question.

   • The return asks whether you wish to opt out of the new tax regime under Section 115BAC(6). Leaving the default answer keeps you in the new regime with the Rs. 75,000 deduction; opting out applies the old regime and the Rs. 50,000 deduction.
   • The choice applies to the whole return (salary and all other income), not item by item.

5. Claim employer NPS separately.

   • Employer contribution to NPS is claimed under Section 80CCD(2) in the deductions schedule, and is allowed in both regimes. It is not part of the standard deduction.

6. No receipts or proof required.

   • The standard deduction needs no bills or investment proof.
   • Keep the Form 16 from each employer and match the salary and TDS figures against the filed return.

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Common ITR Filing Scenarios

Scenario A: Salary of Rs. 75,000 in a year, new regime

• Gross salary: Rs. 75,000
• Standard deduction: Rs. 75,000 (capped at actual salary; no reduction beyond earned amount)
• Taxable income: Rs. 75,000 − Rs. 75,000 = Rs. 0
• Tax payable: Rs. 0
• Result: Zero tax (no TDS deduction needed).

Scenario B: Salary of Rs. 12,00,000, new regime (the common case)

• Gross salary: Rs. 12,00,000
• Gross salary as per Form 16 Part B: Rs. 12,00,000
• Standard deduction under Section 16(ia), computed by the utility: Rs. 75,000
• TDS from Form 16: Rs. 0 (the employer factors in the standard deduction and Section 87A rebate under Section 192)
• Net salary for tax: Rs. 12,00,000 − Rs. 75,000 = Rs. 11,25,000
• Tax at slabs Rs. 52,500; Section 87A rebate of Rs. 52,500 applies (income within Rs. 12L).
• Result: Tax Rs. 0 (assuming no other income).

Scenario C: Two employers (Employer A Apr to Dec, Employer B Jan to Mar), old regime

• Employer A salary: Rs. 7,50,000 (Form 16 issued)
• Employer B salary: Rs. 2,50,000 (Form 16 issued)
• Total gross salary reported in the ITR: Rs. 10,00,000
• Regime chosen: Old tax regime
• Standard deduction in the ITR: Rs. 50,000 (not Rs. 50K + Rs. 50K; total capped)
• Net salary: Rs. 10,00,000 − Rs. 50,000 = Rs. 9,50,000
• Tax calculated on Rs. 9,50,000 under old regime slabs.

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Regime Selection: Why It Matters for Standard Deduction

Regime selection is a one-time decision per financial year and applies to all income in your ITR (not just salary):

Most salaried employees benefit from new regime due to the Rs. 75K deduction + Section 87A rebate combination.

Standard Deduction Comparison: When Old Regime Wins

Despite the Rs. 75,000 deduction advantage, the old regime can still win when your exemptions and deductions are large, typically HRA, home loan interest, and full 80C/80D claims.

Edge Case 1: Salaried Employee with Significant Capital Gains

• Salary: Rs. 25,00,000
• Long-term capital gains on listed equity: Rs. 5,00,000 (held more than 12 months)
• LTCG is taxed at 12.5% above the Rs. 1.25 lakh exemption under Section 112A in both regimes, and capital losses are set off the same way in both.
• Verdict: Capital gains do not change the regime decision. Compare only the slab tax on salary and other income, after the deductions each regime allows.

Edge Case 2: Salaried Employee with House Rent Allowance (HRA) & Home Loan Interest

• Salary: Rs. 15,00,000
• HRA received: Rs. 3,00,000 (exempt under Section 10(13A), limits apply)
• Home loan interest: Rs. 3,00,000 (deductible under Section 24 at capped Rs. 2,00,000 for self-occupied)
• New regime: Cannot claim HRA exemption or home loan interest deduction. Standard deduction only: Rs. 75K.
• Old regime: HRA exemption (up to Rs. 3L, the least of actual HRA, rent paid minus 10% of salary, and 50% of salary in metros or 40% elsewhere) + home loan interest (Rs. 2L deduction) = Rs. 5L+ deductions vs Rs. 75K
• Verdict: With about Rs. 5 lakh of exemptions and deductions on a Rs. 15 lakh salary, the old regime is likely to win. Run both computations before filing, as the answer depends on your full deduction profile, not the home loan alone.

Edge Case 3: Pensioner with Gratuity + Pension Income

• Pension: Rs. 12,00,000 (taxed as salary, standard deduction applies)
• Gratuity received: Rs. 10,00,000 (exempt under Section 10(10) within the applicable limit, Rs. 20 lakh for non-government employees)
• New regime: Pension (Rs. 12L − Rs. 75K = Rs. 11.25L) + exempt gratuity = Rs. 11.25L taxable, fully covered by the Section 87A rebate, so tax is zero
• Old regime: Pension (Rs. 12L − Rs. 50K = Rs. 11.5L) less any 80C/80D deductions, taxed at old regime slabs
• Verdict: The gratuity exemption applies in both regimes. Unless deductions are large, the new regime gives zero tax here.

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Standard Deduction Edge Cases & Traps

Trap 1: "I Earned Rs. 40,000 But Can Claim Rs. 75,000"?

No. Standard deduction cannot exceed actual salary received. If your gross annual salary is Rs. 40,000, your standard deduction is Rs. 40,000, not Rs. 75,000. The ITR utility caps it automatically.

Trap 2: Job-Switching and Double Deduction

If you worked for Employer A from April to December (salary Rs. 8L, Form 16 issued) and switched to Employer B from January to March (salary Rs. 2L, Form 16 issued):

• Total salary: Rs. 10L
• ITR deduction: Rs. 75,000 total (new regime), not Rs. 75K + Rs. 75K
• Each employer applies their own Rs. 75K deduction in their payroll, but your ITR must reflect the correct total (capped at Rs. 75K).
• Reconciliation needed: If both employers applied Rs. 75K, claim it only once in your ITR and pay any resulting TDS shortfall as self-assessment tax.

Trap 3: Standard Deduction Does NOT Apply to Freelancers or Business Income

If you have self-employment income (consulting, freelancing, business):

• Standard deduction is not available.
• You claim actual business expenses or use presumptive taxation (e.g., Section 44ADA: assume 50% of professional receipts as profit; Section 44AD: assume 8% of turnover for cash/6% for digital transactions).
• Mixing salary + business income in your ITR uses the deduction on salary only; business income has its own expense/presumption rules.

Trap 4: Pensioner Pitfall: Family Pension is Different

If your deceased spouse/parent left you a family pension (continuing for your lifetime):

• Family pension is not salary.
• Standard deduction (Rs. 75K new / Rs. 50K old) does not apply.
• Instead, you claim a separate family pension deduction of Rs. 25,000 (new regime) or Rs. 15,000 (old regime) under Section 57(iia).
• Don't confuse: Regular pension (taxed as salary) vs family pension (different treatment).

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Common Mistakes to Avoid

1. Claiming Rs. 75,000 in the old regime. The Rs. 75,000 amount applies only under the new tax regime. If you opt for the old regime, your standard deduction is Rs. 50,000. A wrong claim is adjusted by CPC during processing under Section 143(1)(a), which can create a tax demand with interest.

2. 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 Rs. 25,000 (new regime) or Rs. 15,000 (old regime) under Section 57(iia), not the Rs. 75,000 standard deduction.

3. 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 Rs. 75,000. Report total salary and a single standard deduction, then pay any TDS shortfall as self-assessment tax.

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 Rs. 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.

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Related Guides: Complete Tax Compliance for Salaried Employees

Standard deduction is one piece of tax compliance. Maximize your savings by understanding:

• Section 87A Rebate: Zero Tax Up to ₹12 Lakh: How the ₹60,000 rebate combines with standard deduction for complete tax elimination under the new regime.

• Old vs New Tax Regime Comparison (AY 2026-27): When the old regime (with HRA exemption, home loan deduction) outpaces the new regime's standard deduction.

• ITR-1 (Sahaj) Filing Guide for Salaried Employees: Step-by-step ITR filing, including where to enter salary, standard deduction, and TDS from Form 16.

• Section 80C Investments: Tax Savings Up to ₹1.5 Lakh: Available only in old regime. Compare 80C benefit (ELSS, PPF, NSC) against new regime's standard deduction.

• Form 16 from Employer: How to Read and Verify: Verify your salary, TDS, and employer's deduction application match your ITR entry.

• Tax-Free Allowances: HRA, LTA, Medical Reimbursement: Salary components that are exempt before the standard deduction applies.