What is Standard Deduction?
Standard deduction is a flat amount that salaried employees and pensioners can deduct from their gross salary before calculating income tax. Introduced in Budget 2018, it replaced the earlier transport allowance (₹19,200) and medical reimbursement (₹15,000). Unlike other deductions such as 80C or 80D, the standard deduction does not require any proof, investment, or expenditure — it is automatically available to all eligible individuals.
For FY 2025-26 (Assessment Year 2026-27), the standard deduction amounts are:
| Tax Regime | Standard Deduction |
|---|---|
| New Regime | ₹75,000 |
| Old Regime | ₹50,000 |
Who Can Claim Standard Deduction?
- Salaried employees — All employees receiving salary from an employer, regardless of salary level.
- Pensioners — Individuals receiving pension income can also claim the standard deduction.
- Government and private sector — Available to both government and private sector employees.
Not eligible: Freelancers, self-employed individuals, and those earning only from business income cannot claim the standard deduction. They have their own deduction mechanism through business expenses.
Standard Deduction History
| Financial Year | Amount | Notes |
|---|---|---|
| FY 2018-19 | ₹40,000 | Introduced, replacing transport + medical |
| FY 2019-20 | ₹50,000 | Increased by ₹10,000 |
| FY 2020-25 | ₹50,000 | No change |
| FY 2025-26 | ₹75,000 | New regime only (Budget 2024) |
Impact of ₹75,000 Standard Deduction
The increased standard deduction of ₹75,000 under the new regime has a significant impact. Consider someone earning ₹12,75,000 gross salary. After the ₹75,000 standard deduction, their taxable income becomes exactly ₹12,00,000, making them eligible for the full Section 87A rebate under the new regime. This effectively means zero tax on salary up to ₹12.75 lakh under the new regime.
This is one of the key reasons the new regime has become more attractive for a larger segment of taxpayers. Use our income tax calculator to see the exact impact on your salary.
Standard Deduction vs Other Deductions
It is important to understand how the standard deduction differs from other popular deductions like Section 80C, HRA exemption, and Section 80D. The standard deduction is unique in that it requires no documentation or investment. It is available under both old and new regimes, while most other deductions are only available under the old regime.
| Feature | Standard Deduction | 80C | HRA |
|---|---|---|---|
| Proof Required | No | Yes | Yes |
| Old Regime | Yes (₹50K) | Yes | Yes |
| New Regime | Yes (₹75K) | No | No |
| Max Limit | ₹75,000 | ₹1,50,000 | Varies |
How to Claim Standard Deduction
- The standard deduction is automatically applied by your employer when calculating TDS on salary.
- When filing your income tax return, claim it under the salary income section.
- You do not need to submit any proof or documentation.
- In the ITR form, the standard deduction is pre-filled if you use the pre-filled data from your Form 16.
- Ensure you claim the correct amount based on your chosen tax regime.