Standard Deduction for Salaried Employees 2025-26

Standard Deduction for Salaried Employees 2025-26

Standard deduction is a flat deduction from salary income that every salaried employee and pensioner can claim without providing any proof or making any investment. It was reintroduced in 2018 and has been updated multiple times since. For FY 2024-25 (AY 2025-26), the deduction amounts differ based on the tax regime you choose.

Standard Deduction Amounts

The Union Budget 2024 increased the standard deduction under the new regime from Rs 50,000 to Rs 75,000, making the new regime more attractive for many taxpayers.

Who Can Claim Standard Deduction?

Standard deduction is available to:

• Salaried employees – All individuals receiving salary income (private sector, government, PSU)
• Pensioners – Both family pension and regular pension recipients

It is not available to:

• Self-employed individuals and freelancers
• Individuals with income only from business or profession
• Individuals with income only from house property, capital gains, or other sources

How Standard Deduction Works

The standard deduction is subtracted directly from your gross salary income. No proof of expenses is needed. It reduces your taxable income before any other deductions are applied.

Example:

• Gross Salary: Rs 8,00,000
• Standard Deduction (New Regime): Rs 75,000
• Income after Standard Deduction: Rs 7,25,000

For the new regime, if your total income (after standard deduction) is Rs 7 lakh or less, you pay zero tax due to the Section 87A rebate. This means a salaried employee earning up to approximately Rs 7,75,000 can have zero tax liability under the new regime.

Standard Deduction for Family Pension

Recipients of family pension can claim a deduction under Section 57(iia):

• One-third of the pension received, or
• Rs 25,000, whichever is lower

This is available under both the old and new tax regimes.

History of Standard Deduction

Impact on Tax Regime Choice

The increased standard deduction of Rs 75,000 in the new regime narrows the gap between the two regimes. Previously, the old regime had a significant advantage due to higher deductions. Now, the additional Rs 25,000 standard deduction partially compensates.

For a taxpayer in the 30% bracket, the Rs 25,000 increase saves an additional Rs 7,800 (including cess) under the new regime compared to the old regime standard deduction.

Standard Deduction vs Other Deductions

Standard deduction replaced the transport allowance (Rs 19,200) and medical reimbursement (Rs 15,000) that were available earlier. At Rs 50,000 or Rs 75,000, it provides a higher benefit than the combined Rs 34,200 it replaced.

Key advantage: Standard deduction requires no documentation. Unlike HRA (needs rent receipts), 80C (needs investment proofs), or 80D (needs insurance receipts), standard deduction is automatic.

Multiple Employers in a Year

If you switch jobs during the year and receive salary from two employers, you can still claim only one standard deduction. The deduction is per individual, not per employer. When filing your return, combine the salary from both employers and apply the standard deduction once.

Claim Your Standard Deduction with FileWithUs.ai

FileWithUs.ai automatically applies the correct standard deduction based on your chosen tax regime and income type. Whether you are a salaried employee or pensioner, our platform ensures this deduction is correctly factored into your tax computation without any manual input required.