Standard Deduction Under the New Income Tax Act, 2025 — Complete Guide

Standard Deduction Under the New Income Tax Act, 2025

The standard deduction is the simplest tax break available to salaried employees and pensioners — no bills, no proofs, no conditions. It’s automatically subtracted from your gross salary before tax is computed. Here’s how it works under the new Act.

Current Amounts

The new Act governs this deduction under Section 19 (successor to the old Section 16(ia)).

Who Can Claim It

•             Any individual with income under the head “Salaries” — including pensioners, since pension is treated as salary income for this purpose.

•             Available automatically; your employer applies it while computing monthly TDS, and it’s pre-filled in your ITR.

•             Not available to those with only business, professional, rental, or capital gains income — it’s specific to the “Salaries” head.

Why the New Regime Gets a Higher Amount

When the government redesigned the new regime to be more attractive (removing HRA, LTA, and most Chapter VIII deductions), it compensated with a larger standard deduction — ₹75,000 versus ₹50,000 under the old regime — as a partial offset for the exemptions that are no longer available.

How It Fits Into Your Salary Computation

1.          Start with gross salary (basic + allowances + perquisites + bonus).

2.          Subtract the standard deduction (₹75,000 new regime / ₹50,000 old regime).

3.          Under the old regime, further subtract HRA exemption, Section 123 investments, home loan interest, etc.

4.          Apply the applicable slab rates to the resulting net taxable income.

Example

A salaried employee with ₹9,00,000 gross salary, opting for the new regime: taxable salary income = ₹9,00,000 − ₹75,000 = ₹8,25,000. Under the old regime with no other deductions claimed, it would be ₹9,00,000 − ₹50,000 = ₹8,50,000.

Frequently Asked Questions

Q1. Do I need to submit any documents to claim the standard deduction? No — it’s automatic. Your employer applies it while computing salary TDS, and it appears pre-filled on your ITR.

Q2. Can a pensioner claim the standard deduction on family pension too? Family pension has a separate, smaller standard deduction (a flat amount or one-third of the pension, whichever is lower, subject to a cap) — different from the regular salary standard deduction. Regular pension received by the pensioner themselves gets the full standard deduction like salary.

Q3. Is the standard deduction available to both salaried employees and business owners? No — it applies only to income taxed under the “Salaries” head. Business and professional income has its own set of deductions for actual expenses instead.

Amounts reflect Tax Year 2026-27. These are periodically revised through the Union Budget.