Standard Deduction on Salary in FY 2024–25: Claim ₹75,000 Automatically & Save Tax Smartly

Understand how the ₹75,000 standard deduction on salary works under new and old tax regimes. Learn eligibility, savings impact, and how to claim it in ITR filing.

Income Tax Calculator

(Old vs New Tax Regime Calculator)

Introduction: Why the Standard Deduction on Salary Matters Now More Than Ever

The Union Budget 2024–25 brought a significant relief for India’s salaried and pensioned citizens. One of the most talked-about changes was the increase in the standard deduction on salary from ₹50,000 to ₹75,000, applicable even under the new tax regime.

For many working professionals, this deduction can directly reduce taxable income and result in real savings. And unlike investments or deductions under Sections like 80C or 80D, this benefit is automatic—no bills or proof required.

But what exactly is this standard deduction? Who can claim it? And how does it affect your take-home salary or net tax outgo? Let’s decode everything in simple terms.

What Is Standard Deduction on Salary?

The standard deduction is a flat reduction allowed from your gross salary or pension income before calculating your taxable income. Think of it as an automatic tax break—available to all salaried individuals and pensioners, regardless of expenses or investments.

Initially reintroduced in Budget 2018, the deduction started at ₹40,000, increased to ₹50,000 in 2019, and now raised to ₹75,000 in Budget 2024–25 for both regimes.

This helps reduce your taxable income and offers a hassle-free way to save tax, especially for those who may not have large savings or 80C investments.

Old Tax Regime vs New Tax Regime: What Changes in FY 2024–25?

In earlier years, the standard deduction was available only under the old tax regime. But starting FY 2023–24, the government extended it to the new regime too. And from April 1, 2024, the limit has increased further.

Here’s a quick comparison to understand the shift:

The increase to ₹75,000 makes the new regime more appealing for middle-income earners, especially those who don’t claim many deductions.

Also note, if your total taxable income falls under ₹7 lakh (after deductions), you may qualify for full tax rebate under Section 87A, effectively making you tax-free. For updated rebate rules and slab insights, refer to the Income Tax Department’s official page.

Who Can Claim the Standard Deduction?

You can claim the standard deduction if you fall under any of the following categories:

• Salaried Individuals: Anyone drawing a salary from employment.
• Pensioners: Including family pension earners (in a limited way).
• No age or gender restriction.
• Available to both private and government employees.

Unlike other deductions, you don’t need to submit proof or documentation. It’s automatically adjusted in your Form 16 and carried into your ITR, whether you’re filing through a tax expert or self-filing through platforms like NSDL e-Gov.

Why This Matters in Real Terms

Let’s break this down with a real-world example:

Example: If your annual salary is ₹9,50,000

• After ₹75,000 deduction → New taxable income = ₹8,75,000
• Tax on ₹8.75L under new regime = approx. ₹35,000
• Previously, at ₹50,000 deduction, you paid around ₹41,600

Savings = ₹6,600, just from this change.

Standard Deduction Timeline: How It Evolved Over the Years

The standard deduction on salary didn’t always exist in its current form. Its journey has mirrored India’s changing tax policies and fiscal priorities. To better understand how we reached the current ₹75,000 deduction, here’s a concise look at its evolution.

This steady enhancement shows the government’s intent to simplify income tax calculations and widen the appeal of the new tax regime, which previously lacked many of the deductions available in the old structure.

The 2024 Budget played a pivotal role by increasing the deduction to ₹75,000 across both regimes. This move is especially beneficial for middle-class earners who often struggle to invest enough to claim benefits under 80C or 80D.

You can view the complete official budget document for FY 2024–25 on the Union Budget website, where standard deduction updates are recorded in the income tax section.

Real-World Examples: How Much You Actually Save

To make things easier, let’s look at a few scenarios of how the standard deduction on salary changes your taxable income and final tax liability in practical terms.

Scenario 1: ₹7.5 Lakh Annual Salary

Scenario 2: ₹10 Lakh Annual Salary

As seen above, even without additional deductions, the updated standard deduction brings visible savings. It becomes even more powerful when combined with rebates like Section 87A, which allows up to ₹25,000 rebate for eligible individuals.

For accurate tax calculations, you can cross-check current slab rates and rebate rules through reliable portals such as Tax Information Network of India.

Eligibility Clarified: Pensioners, Private Employees, and More

There’s often confusion around who exactly qualifies for this benefit. Here’s a breakdown:

• Pensioners: Those receiving a pension from a previous employer are treated as salaried individuals and can claim the full deduction.
• Family Pension Holders: They can claim a separate deduction of ₹15,000 under Section 57(ii)(a), not the standard ₹75,000.
• Multiple Employers: If you switch jobs in a year, the deduction is still capped at ₹75,000 for the financial year—not per employer.
• Private Sector Employees: Eligible just like government staff.
• Part-time or Contractual Workers: If your earnings are shown as salary (not professional income), you can claim it.

Combining Standard Deduction with Section 87A: Maximize Your Tax Savings

While the standard deduction on salary reduces your taxable income, Section 87A offers a tax rebate that can further lower—or even eliminate—your final tax payable. When used together, they can be particularly beneficial for those earning up to ₹12 lakh per year.

Let’s understand how the deduction and rebate work side by side.

What Is Section 87A?

Section 87A provides a tax rebate of up to ₹25,000 for individuals whose net taxable income after deductions is less than or equal to ₹7 lakh (as per the new regime rules introduced in Budget 2023).

This rebate is applied on the final tax amount, not the income—so even if your calculated tax is ₹22,000, the full amount is waived under this rebate.

With the new ₹75,000 standard deduction in place, individuals with gross income slightly above ₹7 lakh can now fall within the 87A limit after deductions.

Sample Illustration: Standard Deduction + Section 87A

This means many individuals in the ₹7.5–8 lakh salary band may want to consider the new regime, especially if they aren’t claiming many deductions elsewhere. For official clarity, check the updated rebate details on the Income Tax India portal.

How to Claim Standard Deduction in ITR Filing

Claiming the standard deduction on salary is straightforward and doesn’t require any investment proofs or documents. However, the right ITR form and filing steps matter to ensure it’s correctly reflected.

Step-by-Step Process:

1. Choose the Right ITR Form:
   • ITR-1 (Sahaj): For salaried individuals with income up to ₹50 lakh.
   • ITR-2/3: If you have capital gains or business income.
2. Auto-filled Form 16:
   Your employer’s Form 16 will usually pre-fill the deduction under the “Income from Salary” section.
3. Login to e-Filing Portal:
   Go to https://www.incometax.gov.in/ and log in using your PAN.
4. Check ‘Income Details’ Section:
   Under ‘Gross Salary’, you’ll see a field for standard deduction. Ensure it reflects ₹75,000 for FY 2024–25.
5. Validate & Submit:
   Review all deductions, submit the form, and e-verify.
6. Download Acknowledgement:
   Keep a copy for future reference, especially during employer form submission or income proof queries.

This deduction is auto-applied by most employers in Form 16. But if you’re a pensioner or filing independently, make sure you manually enter the correct amount while filing the return.

For further guidance, the Tax Filing Guide by MyGov offers additional clarity on ITR-related terms and documents required.

Standard Deduction on Salary: What People Commonly Ask

As the standard deduction on salary continues to evolve, so do the questions around it. Many salaried employees, retirees, and even self-filers remain unsure about eligibility, calculation, and filing procedures. Here are some of the most frequently asked questions, addressed in a simple and practical way.

1. Is the Standard Deduction Available in Both Old and New Regimes?

Yes, from FY 2023–24 onwards, it is available in both tax regimes. Previously, it was limited to the old regime. In FY 2024–25, the deduction has been increased to ₹75,000 across both structures.

2. Do I Need to Submit Any Documents to Claim It?

No documentation is needed. It is an automatic deduction applied to all eligible salaried individuals and pensioners. Employers usually reflect this in Form 16.

3. Can I Claim the Deduction if I Have Switched Jobs in the Same Financial Year?

Yes. But the standard deduction limit remains ₹75,000 per year, not per employer. So even if you’ve had multiple employers, the maximum you can claim is still ₹75,000 in total.

4. Is the Deduction Available to Family Pensioners?

Not in full. Family pensioners are eligible for a separate fixed deduction of ₹15,000 or 1/3rd of pension received (whichever is lower), under Section 57(iia). This is different from the standard deduction and cannot be clubbed.

You can refer to this official clarification on the Income Tax India site for deeper insights into family pension rules.

5. Will It Show Automatically in My ITR Filing?

If you’re using the pre-filled ITR form provided by the government portal or a certified employer, it should appear automatically under the ‘Income from Salary’ section. However, pensioners or freelancers with salaried stints must manually ensure it’s reflected while filing.

6. Can NRIs Claim the Standard Deduction?

No. Only resident individuals drawing salary or pension from an Indian employer or pension scheme are eligible. Non-residents do not qualify.

Common Filing Mistake to Avoid

Many taxpayers unknowingly override the pre-filled standard deduction field while manually editing income figures. Doing this might lead to errors in tax computation or notices during processing. Always verify if the ₹75,000 deduction is reflected in the ‘Income from Salary’ tab, especially if you’re filing through a third-party tax software.

For error-free returns, platforms like Tax2win or Cleanslate Tax offer assisted filing that cross-checks auto-populated deductions for accuracy.

Helpful Tip:

If you’re receiving a pension from an old employer and are unsure whether it qualifies as salary income (and thus eligible for the standard deduction), it’s best to refer to your Form 16A or pension slip. In many cases, pension income is taxed under the “Salaries” head, making it eligible.

Final Takeaways: Why the ₹75,000 Standard Deduction on Salary Is a Game Changer

For the average Indian taxpayer, small changes in tax rules often result in big financial relief over time. The recent increase in standard deduction on salary to ₹75,000 is not just a routine update—it’s a significant shift that can bring real savings without the usual paperwork or eligibility hassles.

Here’s why this change stands out:

• Automatic Benefit: No investment proofs or tax-saving declarations required.
• Inclusive Coverage: Available to all salaried individuals and pensioners, regardless of employer or sector.
• Regime-Neutral: Offered in both old and new tax regimes, giving flexibility to taxpayers.
• Rebate Compatibility: Pairs well with Section 87A to help zero out tax liability for middle-income earners.

For those struggling to choose between the two regimes, the availability of standard deduction under the new tax regime may tilt the scales. Especially if you have limited 80C investments, this deduction could help reduce your net tax liability without complicating your financial planning.

To better assess what works for you, the Government of India’s official tax calculator allows you to compare outcomes under both regimes by factoring in deductions like standard deduction, HRA, and 80C.

Strategic Use of the Standard Deduction

Whether you’re a private sector employee, a government servant, or a retiree drawing a pension, using the standard deduction effectively requires understanding how it interacts with your income structure.

Let’s look at some practical considerations:

In the case of government employees, particularly those benefiting from recent Dearness Allowance (DA) hikes, the standard deduction helps soften the additional tax impact that comes from DA being fully taxable. This makes salary hikes more meaningful in hand.

Further, if you’re earning income through multiple employers or part-time roles but reported as “salary,” the ₹75,000 limit still applies collectively, not separately per source.

For additional clarity, you can visit the National Portal of India’s Income Tax Guide, which simplifies tax information for Indian citizens across sectors.

Key Takeaway Chart

As the financial year unfolds and new income tax rules take shape, understanding where and how the standard deduction fits into your overall tax planning is crucial. It’s not just a number in your salary slip—it directly affects your bottom line and can influence the tax regime you choose.

FAQ