Standard Deduction for Salaried FY 2026-27: ₹75,000 (New Regime) vs ₹50,000 (Old Regime)
The standard deduction is the simplest tax-saving tool for salaried individuals – no investment needed, no bills to submit. In FY 2026-27, salaried employees and pensioners get a flat deduction of ₹75,000 under the new tax regime and ₹50,000 under the old tax regime. Here’s everything you need to know.
⚡ Standard Deduction FY 2026-27 – Quick Facts
- New Tax Regime: ₹75,000 standard deduction (introduced Budget 2024)
- Old Tax Regime: ₹50,000 standard deduction
- Who gets it: Salaried employees + pensioners (including family pensioners)
- No proof required: Automatically applied – no bills or documentation needed
What is Standard Deduction?
Standard deduction is a flat amount subtracted from your gross salary before computing income tax. It was reintroduced in Budget 2018 (replacing transport allowance and medical reimbursement) to simplify tax compliance. You don’t need to produce any receipts, bills, or proof – the deduction is automatic.
Standard Deduction History: How it Evolved
| Financial Year | Old Regime | New Regime | Key Change |
|---|---|---|---|
| FY 2018-19 to FY 2019-20 | ₹40,000 | N/A | Reintroduced after 15-year gap |
| FY 2019-20 to FY 2023-24 | ₹50,000 | ₹50,000 | Increased to ₹50,000 |
| FY 2024-25 (Budget 2024) | ₹50,000 | ₹75,000 | New regime increased to ₹75,000 |
| FY 2025-26 & 2026-27 | ₹50,000 | ₹75,000 | No change (Budget 2025 & 2026) |
How Standard Deduction Works – Example
Salaried Employee, ₹12 Lakh Gross Salary, New Tax Regime
- Gross salary: ₹12,00,000
- Less: Standard deduction: −₹75,000
- Net taxable income: ₹11,25,000
- Tax on ₹11.25L (new regime): ₹4L@0% + ₹4L@5% + ₹3.25L@10% = ₹52,500
- 87A rebate (income ≤ ₹12L): −₹52,500
- Total tax: ₹0
Without the ₹75,000 standard deduction, the same ₹12L salary would have a taxable income of ₹12L – still within the 87A rebate limit but with zero room for error. The standard deduction pushes the effective tax-free gross income threshold to ₹12,75,000.
Standard Deduction for Pensioners
Pensioners (government and private) are also eligible for standard deduction on their pension income, treated as salary under the Income Tax Act:
- Regular pensioners: ₹75,000 (new regime) or ₹50,000 (old regime) on pension income
- Family pensioners (receiving pension after death of employee): Deduction of 1/3rd of family pension or ₹25,000, whichever is lower – this is separate from the regular standard deduction
Multiple Employers / Job Change During the Year
If you changed jobs during the year, both employers may have given you standard deduction while computing Form 16. However, as an individual, you can claim standard deduction only once (₹75,000) for the entire year – not twice. Ensure your ITR correctly reflects this when you have two Form 16s.
Standard Deduction vs Other Salary Allowances
Standard deduction replaced transport allowance (₹19,200) and medical reimbursement (₹15,000) that were abolished in Budget 2018. The net benefit is higher with the current ₹75,000 standard deduction than the earlier allowances were.
Other allowances like HRA, LTA, and uniform allowance continue to be available under the old tax regime. Under the new tax regime, most allowances are not exempt, making the ₹75,000 standard deduction the primary salary deduction available.
FAQs on Standard Deduction
📚 Also Read:
