Standard Deduction for FY 2024-25: New Rules, ₹75,000 Limit, and Tax Benefits Explained Simply

Wondering how the ₹75,000 standard deduction affects your tax in FY 2024-25? Learn eligibility, tax savings, regime benefits & DA impact in simple words. Ideal for salaried and pensioners choosing between new and old tax regime.

The standard deduction has long been a crucial relief measure for salaried individuals and pensioners in India. For Financial Year (FY) 2024-25, the deduction has been enhanced under the new tax regime—raising questions, comparisons, and strategic tax planning considerations for crores of taxpayers.

With tax season underway and the latest Budget 2024-25 announcements shaping how much individuals save, understanding the standard deduction isn’t just good financial hygiene—it’s essential for smart tax filing.

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Let’s break down what the standard deduction means in the current financial year, who it applies to, and how much tax you actually save depending on the tax regime you choose.

What Is Standard Deduction in Salary?

The standard deduction is a flat deduction from your taxable salary or pension income. You don’t need to submit any bills, proofs, or declarations to claim it. It is an automatic reduction applied to your income before calculating your final tax liability.

This deduction was reintroduced in Union Budget 2018 as a simplified alternative to transport and medical reimbursement claims. Over the years, it has been tweaked to keep pace with changing income dynamics and inflation trends.

Standard Deduction for AY 2025–26: Complete Guide for Salaried and Pensioners

Legal Basis: Section 16(ia) of the Income Tax Act

The legal provision for standard deduction falls under Section 16(ia) of the Income Tax Act, 1961. It allows salaried employees and pensioners to claim a fixed deduction from their gross salary income before arriving at the net taxable amount.

This provision applies to:

• Individuals earning a salary from employment
• Individuals receiving a pension from a previous employer

Self-employed individuals or business income earners are not eligible under this section.

Standard Deduction Limit for FY 2024-25

The following table presents the standard deduction limit based on the tax regime you opt for:

This increase to ₹75,000 under the new regime was introduced in the Union Budget 2024 and continues in FY 2024-25. It’s part of the broader policy push to make the new regime more attractive and tax-friendly for the middle-income population.

To understand tax implications under the new vs. old regimes, refer to updated income tax slab rates for FY 2024-25 by the official income tax department.

How Standard Deduction Impacts Your Tax Liability

A higher standard deduction directly reduces your taxable income, thereby lowering your tax outgo. Consider the following illustrative comparison:

Under the new regime, you get an additional ₹25,000 deduction, which translates to direct tax savings. For a person in the 10% tax slab, that’s a saving of ₹2,500. In higher slabs, the savings increase accordingly.

Who Can Claim the Standard Deduction in FY 2024-25?

You are eligible to claim the standard deduction if:

• You are a salaried employee with a monthly paycheck and Form 16.
• You are a pensioner drawing pension from a former employer, including family pension.
• You choose either the old or new tax regime.

Notably, pensioners under the new tax regime also get the benefit of the increased ₹75,000 deduction, a move that was clarified by the Finance Ministry and explained by multiple tax experts including resources like ClearTax.

Quick History: Evolution of the Standard Deduction in India

The latest enhancement to ₹75,000 is not just a cosmetic move—it reflects the government’s intent to tilt taxpayers toward the new regime while offering meaningful savings to the working class and retired personnel.

How Much Tax Can You Actually Save in FY 2024-25?

One of the most common questions among taxpayers this year is: How much does the enhanced standard deduction really save me? The answer depends on your total income, the tax regime you choose, and whether you fall under the taxable bracket after the deduction.

Here’s a clear breakdown of tax savings across different income levels, comparing both regimes:

The ₹25,000 increase in standard deduction under the new regime offers direct relief by reducing the net taxable income. At higher income brackets, this becomes especially relevant since the marginal tax rate is higher.

For instance, if you’re earning ₹12 lakh annually and fall under the 20% slab, this extra deduction helps you save ₹5,000 in taxes directly. At ₹18 lakh and in the 30% slab, you save ₹7,500 just from this single enhancement.

Budget 2025 Update: Standard Deduction and Revised Tax-Free Income Limit

The Union Budget 2025 further improved the tax experience under the new regime. A significant announcement increased the effective tax-free income to ₹12.75 lakh for salaried individuals, once all deductions and rebates (including the standard deduction) are applied.

Here’s a simplified calculation:

While the rebate under Section 87A is still limited to incomes up to ₹7,00,000, the increased standard deduction means that salaried individuals with earnings close to ₹13 lakh can now reduce their effective taxable income to below ₹12.25 lakh, opening room for lower tax outgo depending on other exemptions.

For salaried professionals using the new regime, this shift puts more money in hand—without the need to invest compulsorily in tax-saving instruments.

You can explore official clarifications and tables from the Ministry of Finance that highlight these updates in context of the new slab-based system.

Is the New Regime Now Better Than the Old One?

This is where things become interesting. While the old regime allows various exemptions and deductions like HRA, LTA, 80C, and 80D, the new regime keeps things straightforward by offering fewer deductions but lower rates and a higher standard deduction.

Here’s a quick side-by-side feature comparison:

So, is the new tax regime better? It depends on your situation:

• If you don’t invest in 80C instruments or claim HRA, the new regime with the ₹75,000 deduction is likely more beneficial.
• If you have significant deductions (HRA, ELSS, tuition fees, insurance), the old regime may still offer better savings.

Trusted tax platforms like BankBazaar offer regime comparison tools to evaluate what suits your profile best based on income, deductions, and lifestyle.

Standard Deduction for Government Employees and Pensioners

The impact of the standard deduction for FY 2024-25 is particularly relevant to India’s vast base of government employees and pensioners. Given that the majority of government staff fall under fixed pay bands, with Dearness Allowance (DA) and pension benefits, even a flat deduction like this plays a significant role in tax savings.

For central and state government employees, the new tax regime is now the default regime, although they can opt for the old regime while filing ITR. With the increase in standard deduction to ₹75,000 under the new regime, many employees earning between ₹7 lakh and ₹15 lakh annually will see higher take-home pay—especially those who do not or cannot claim 80C deductions regularly.

For retired pensioners, the rules remain fairly straightforward:

It’s important to distinguish between pensioners and family pensioners. While retired employees drawing pension are treated as “salaried” under tax rules, family pension (received by nominee/spouse after death of the employee) is treated as “income from other sources”. Hence, the standard deduction for family pension is limited to the lower of ₹15,000 or one-third of pension income, as clarified in this Income Tax India circular.

DA, Inflation & Real Value of Standard Deduction

With salaries and pensions adjusted regularly via Dearness Allowance (DA) hikes, the actual real value of the standard deduction has declined over time when compared to inflation. Though the increase to ₹75,000 in FY 2024-25 is a step forward, its relative benefit is still modest.

Let’s understand with an illustrative table:

In real terms, the ₹75,000 standard deduction today simply brings the deduction closer to inflation-adjusted parity with earlier years. It doesn’t necessarily provide a windfall, but it does ensure that the value of the deduction keeps pace with rising expenses.

As DA increases every 6 months based on the All India Consumer Price Index (AICPI), the government usually updates allowances accordingly. For example, the expected 50% DA hike in July 2025 will automatically revise other linked allowances, which affects the gross salary and thereby the tax base. You can track this through the Ministry of Labour and Employment updates.

How Standard Deduction Benefits Vary by Income Band

For middle-class salaried earners and pensioners, here’s how the enhanced deduction reflects in actual savings:

This clarity in figures makes it easier for individuals—especially those without complicated financial portfolios—to file returns confidently without scrambling for last-minute investments.

How to Claim Standard Deduction in ITR for FY 2024-25

Claiming the standard deduction for FY 2024-25 is a straightforward process. Whether you’re a salaried employee or a pensioner, the deduction is auto-applied when you file your income tax return using the appropriate form. You do not need to upload any documents, bills, or proofs to avail it.

Here’s how it works for different taxpayer categories:

The deduction is pre-filled in most Form 16s issued by employers, and the Income Tax e-filing portal reflects it automatically when you upload Form 16 or pre-fill data.

For pensioners, especially those who receive pensions through nationalised banks like SBI or PNB, the pension is treated as salary income under tax rules. Thus, the ₹75,000 or ₹50,000 deduction applies just like for any working employee.

To understand which ITR form applies to you and how to file it online, visit the official e-filing portal.

Queries on Standard Deduction for FY 2024-25

Can I claim the standard deduction under both regimes?

Yes, the deduction is available under both old and new tax regimes. However, the amount differs—₹50,000 in the old regime and ₹75,000 in the new regime.

Is this deduction available to freelancers or business owners?

No. Standard deduction under Section 16(ia) is strictly limited to individuals drawing salary or pension. Freelancers and business owners may claim other deductions under different sections, but not this one.

Do I need to submit any documents to claim it?

No. The deduction is automatically applied during tax calculation. There is no documentation or investment proof required.

Does a family pensioner also get ₹75,000 deduction?

No. Family pension is treated as income from other sources, and a different deduction under Section 57(iia) is available—lower of ₹15,000 or one-third of the pension received.

You can refer to the CBDT clarification on how family pension is treated under the law.

Will standard deduction increase again next year?

There is no official statement yet, but future budgets may revise the amount based on inflation, tax policy direction, or DA increments. Keeping track of upcoming finance bills and annual budget sessions will offer clarity.

Checklist: Old vs New Tax Regime – Which One Should You Choose?

To decide whether to opt for the new regime (which includes the enhanced standard deduction) or stick with the old one, use this quick comparison checklist:

If you’re salaried with minimal deductions or investments, the new regime (with the ₹75,000 deduction) may give you higher post-tax income. However, if you claim full exemptions under 80C, 80D, or HRA, the old regime might still be more beneficial.

Various financial advisory sites like ET Money offer free calculators that help compare tax liability under both options.

Final Takeaways: Why the Standard Deduction for FY 2024-25 Matters More Than Ever

The increase in standard deduction under the new tax regime from ₹50,000 to ₹75,000 isn’t just a symbolic revision—it holds substantial value for salaried individuals and pensioners in FY 2024-25. With rising cost of living, increasing DA for government employees, and higher income disclosures via AIS/TIS, any flat deduction goes a long way in improving post-tax income.

Whether you’re opting for the new or old tax regime, the deduction now forms a critical part of your tax planning strategy. The enhanced figure under the new regime is also an incentive for those who previously avoided it due to lack of other deductions like HRA or 80C.

To ensure you benefit fully:

• Confirm the deduction is pre-filled when you file your ITR on the income tax e-filing portal.
• Compare both regimes using authentic tools from MyGov, government-backed tax calculators, or trusted financial portals.
• Evaluate your salary structure if you’re in a fixed-pay government job with multiple allowances affected by DA hikes and 7th Pay Commission fitments.

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