Tax on salary in India comes with a few built-in reliefs, and one of the simplest is the standard deduction. It is a fixed amount that comes straight off your salary before tax slabs are applied. There is no form to fill, no proof to submit, and no receipt to save — your employer applies it automatically.
For FY 2026-27, the figure is Rs 75,000 if you are in the new tax regime and Rs 50,000 if you are in the old tax regime. Here is the full picture: who gets it, how it works, the zero-tax math it enables, and what changed over the years.
Quick-answer box
| Item | New tax regime (FY 2026-27) | Old tax regime (FY 2026-27) |
|---|---|---|
| Standard deduction amount | Rs 75,000 | Rs 50,000 |
| Who can claim | Salaried employees and pensioners | Same group |
| Proof needed | None — automatic | None — automatic |
| Rule | Lower of the limit or actual salary | Lower of the limit or actual salary |
| Since when | Rs 75,000 from FY 2024-25 (was Rs 50,000 in FY 2023-24) | Rs 50,000 since FY 2019-20 |
| Shown on | Form 130 (the renamed Form 16) from FY 2026-27 | Same |
What the standard deduction is
The standard deduction is a flat amount the Income-tax Act lets you subtract from salary or pension income before computing taxable income. It replaced the old transport allowance and medical reimbursement exemptions, which is why salaried taxpayers never had to give up this relief when those allowances went away.
The rule sits in Section 16(ia) of the Income-tax Act, 1961 — renumbered as Section 19 of the Income-tax Act, 2025. The amount you claim is the lower of:
- the fixed limit for the regime you are in, or
- your actual salary or pension income.
So if your salary is Rs 40,000 a year, the deduction is Rs 40,000, not the full Rs 75,000. The rule applies only to the “Salaries” head of income. Income from other sources — such as family pension — does not get this deduction.
Your employer subtracts it while computing TDS on your salary, and the figure appears on your annual salary certificate: Form 16 for FY 2025-26 and earlier, and Form 130 (the renamed Form 16) from FY 2026-27.
Who can claim it — and who cannot
Can claim:
– Salaried employees — anyone on a monthly payroll, including contract staff whose pay is taxed as salary.
– Pensioners — regular pension is taxed under the salary head, so the same deduction applies.
– NRIs with salary income from India — residential status does not change the rule; salary from an Indian source gets the same deduction.
Cannot claim:
– Freelancers, professionals and business owners — the deduction is only for the Salaries head. If you declare income under section 44ADA, your 50% deemed-profit rule already covers expenses; there is no separate standard deduction.
– Family pension receivers — family pension is taxed under “income from other sources”, so it gets a different, smaller deduction: Rs 15,000 in the old regime and Rs 25,000 in the new regime (Section 57(iia)), not the salary standard deduction.
– Any other head of income — capital gains, house property, or winnings cannot use it.
New regime vs old regime amounts
| Regime | Standard deduction | Why the difference |
|---|---|---|
| New tax regime | Rs 75,000 | Lower slab rates, fewer exemptions — the higher flat deduction keeps salaried taxpayers competitive |
| Old tax regime | Rs 50,000 | Higher slab rates, but many other deductions (HRA, 80C, home-loan interest) are available |
The new regime has been the default since FY 2023-24 (Section 115BAC, now Section 202 of the 2025 Act). The standard deduction is one of the very few deductions that exist in both regimes — which is exactly why it matters so much in regime comparisons. See our full old vs new regime comparison for the break-even math.
How the “zero-tax” math works
This is the calculation that makes headlines. Under the new regime for FY 2026-27, the slabs are: nil up to Rs 4 lakh, 5% on Rs 4–8 lakh, 10% on Rs 8–12 lakh, 15% on Rs 12–16 lakh, 20% on Rs 16–20 lakh, 25% on Rs 20–24 lakh, and 30% above Rs 24 lakh.
Take a salary of Rs 12,75,000:
- Gross salary: Rs 12,75,000
- Less standard deduction: Rs 75,000
- Taxable income: Rs 12,00,000
- Slab tax on Rs 12,00,000: 5% of Rs 4,00,000 (Rs 20,000) + 10% of Rs 4,00,000 (Rs 40,000) = Rs 60,000
- Section 87A rebate (now Section 156): up to Rs 60,000 for total income up to Rs 12,00,000
- Tax payable: Rs 0
That is how a Rs 12.75 lakh salary pays zero tax: the deduction pulls income down to the rebate ceiling, and the rebate wipes out the tax. If the salary is even a rupee higher, marginal relief keeps the extra tax capped at roughly the extra income.
Worked examples
Example 1 — Zero tax at Rs 12.75 lakh (new regime)
| Step | Amount (Rs) |
|---|---|
| Gross salary | 12,75,000 |
| Standard deduction (75,000) | −75,000 |
| Taxable income | 12,00,000 |
| Slab tax (5% on 4L + 10% on 4L) | 60,000 |
| Section 87A rebate | −60,000 |
| Tax payable | 0 |
No other deduction or proof is involved. The number is exact because the rebate is calibrated to equal the slab tax at Rs 12 lakh.
Example 2 — Rs 18 lakh salary, regime comparison (no other deductions)
New regime: taxable income = 18,00,000 − 75,000 = 17,25,000. Tax = 20,000 (5% band) + 40,000 (10%) + 60,000 (15%) + 80,000 (20%) + 31,250 (25% on the last 1,25,000) = Rs 2,31,250.
Old regime: taxable income = 18,00,000 − 50,000 = 17,50,000. Tax = 12,500 (5% on Rs 2.5–5L) + 1,00,000 (20% on Rs 5–10L) + 2,25,000 (30% above Rs 10L) = Rs 3,37,500.
Result: the new regime saves Rs 1,06,250 here, even with fewer deductions. If the employee also claims HRA, 80C and home-loan interest, the old regime can pull ahead — which is why the regime choice is personal, not universal.
Practical impact: what it is worth in rupees
The deduction saves tax at your marginal slab rate:
- At the 30% slab (plus 4% cess): Rs 75,000 × 31.2% = Rs 23,400 saved per year
- At the 20% slab: Rs 75,000 × 20.8% = Rs 15,600 saved per year
- At the 10% slab: Rs 75,000 × 10.4% = Rs 7,800 saved per year
Two things that often get missed:
- Your employer’s TDS already accounts for it. When payroll computes TDS on your salary, the standard deduction is subtracted before applying slabs — so your monthly TDS is lower from April itself. You do not wait until filing your ITR to get the benefit.
- Low-salary earners are fully covered. Anyone earning up to Rs 75,000 a year pays no tax at all on that salary under the new regime, with zero paperwork.
What changed / what stayed
| Aspect | What changed | What stayed |
|---|---|---|
| New-regime amount | Raised to Rs 75,000 from FY 2024-25 (Budget 2024); was Rs 50,000 in FY 2023-24 | — |
| Old-regime amount | — | Rs 50,000, unchanged since FY 2019-20 |
| Who it covers | — | Salaried employees and pensioners in both regimes |
| Proof requirement | — | None; fully automatic |
| Lower-of rule | — | Deduction cannot exceed actual salary |
| Freelancers / business income | — | Still not eligible (Salaries head only) |
| Family pension | — | Separate deduction (Rs 15,000 old / Rs 25,000 new) under Section 57(iia) |
| Salary certificate | Form 16 renamed to Form 130 from FY 2026-27 | Two-part structure continues |
| Section number | 16(ia) → Section 19 of the Income-tax Act, 2025 | Substance of the rule unchanged |
Frequently asked questions
Is the standard deduction of Rs 75,000 applicable to all?
No. The Rs 75,000 figure applies only to taxpayers under the new tax regime. It is available to all salaried employees and pensioners whose salary or pension is at least that amount — if the salary is lower, the deduction equals the salary itself. Old-regime taxpayers get Rs 50,000 instead.
What is the standard deduction for FY 2025-26?
For FY 2025-26 it was Rs 50,000 under the old regime and Rs 75,000 under the new regime. The higher new-regime figure came from Budget 2024 and applied from FY 2024-25 onward.
What is the standard deduction for income tax?
It is a fixed amount subtracted from salary or pension income before tax is computed: Rs 75,000 in the new regime and Rs 50,000 in the old regime for FY 2026-27. It is automatic — no proof or document is needed.
How is Rs 12 lakh tax free?
Under the new regime, a Rs 12,75,000 salary minus the Rs 75,000 standard deduction gives taxable income of exactly Rs 12,00,000. The slab tax on that is Rs 60,000, and the Section 87A rebate (up to Rs 60,000 for income up to Rs 12 lakh) wipes it out completely. Net tax: zero.
Is standard deduction available on pension?
Yes. Regular pension is taxed under the salary head, so it gets the same standard deduction: Rs 75,000 in the new regime and Rs 50,000 in the old regime, subject to the same lower-of-salary rule. Family pension is the exception — it is taxed under “other sources” and gets its own smaller deduction.
Can freelancers claim standard deduction?
No. The deduction applies only to income under the “Salaries” head. Freelancers, professionals and business owners compute taxable income differently (including the 44ADA presumptive scheme) and do not get this deduction.
Official sources
- Income-tax e-filing portal — official filing and deduction guidance
- Central Board of Direct Taxes — circulars and TDS-on-salary guidance
- India Code — text of the Income-tax Act, 2025 (Section 19)
Reviewed by Asuthod Rathod, CA
This article was reviewed for tax accuracy by Asuthod Rathod, Chartered Accountant.
Last updated: 19 October 2026
Disclaimer: This article is for general information only and is not tax advice. Tax rules can change; confirm your position with a qualified tax professional or the official income-tax portal before filing.
Editorial byline for eircicai income tax guides — covering the Income Tax Act, 2025, section renumbering, regime comparison, and deductions. Content is reviewed by Asuthod Rathod, CA.