Standard Deduction
Standard deduction is a flat reduction from salary income with no need to submit any proof. For FY 2025-26, it is ₹75,000 under the new tax regime and ₹50,000 under the old regime, available to salaried employees and pensioners.
What is Standard Deduction?
Standard deduction was reintroduced in FY 2018-19 at ₹40,000 to replace transport allowance and medical reimbursement. It later moved to ₹50,000 and is now ₹75,000 under the new regime (Finance Act 2024). The old regime still uses ₹50,000. It is available against income from salary or pension, not against business or rental income. There's no need to declare any expense or submit any bill. Payroll automatically reduces gross salary by the standard deduction before computing TDS. The extra ₹25,000 in the new regime is one of the reasons the new regime now beats the old one for many mid-income salaried employees, especially those without home loans or large rent.
Example
Anjali's gross salary is ₹9 lakh. Under the new regime, taxable salary becomes ₹9,00,000 - ₹75,000 = ₹8,25,000. Under the old regime, it becomes ₹9,00,000 - ₹50,000 = ₹8,50,000. The new regime starts ₹25,000 ahead before any other deduction.
How Standard Deduction is used
Payroll applies standard deduction automatically every month, prorated across 12 months, based on the regime the employee has selected. It shows up on payslips and Form 16.
Standard Deduction FAQs
Do pensioners get the standard deduction?
Yes. Pension is treated as salary for this purpose, so pensioners get ₹75,000 (new regime) or ₹50,000 (old regime).
Can freelancers claim standard deduction?
No. Standard deduction is only for salary or pension income. Freelance and business income do not qualify.
Is standard deduction over and above HRA?
Yes, in the old regime. You can claim HRA exemption and the ₹50,000 standard deduction together. The new regime gives ₹75,000 standard deduction but no HRA.