Standard Deduction Under Section 16(ia): ₹75,000 Tax Relief for Salaried & Pensioners in 2024–25

Understand the ₹75,000 standard deduction under Section 16(ia) for FY 2024–25. See who can claim it, how it compares with the old regime, and how it helps salaried employees and pensioners save more in taxes.

As salaries rise and tax structures evolve, understanding the standard deduction under Section 16(ia) becomes essential for every Indian employee—especially in FY 2024–25. Whether you are a government servant, a private-sector employee, or a pensioner, this deduction significantly reduces your taxable income without requiring any bills or proofs.

Income Tax Calculator

(Old vs New Tax Regime Calculator)

With the standard deduction limit now at ₹75,000 under the new tax regime (as per Budget 2024), there’s growing curiosity among taxpayers to decode its benefits, eligibility, and how it fits into overall tax planning. This article walks you through every detail—from historical background to actionable impact—so you can make informed financial choices.

What Is the Standard Deduction Under Section 16(ia)?

Section 16(ia) of the Income Tax Act, 1961 allows a flat deduction from your gross salary or pension income. This amount is subtracted before your taxable income is computed. The best part? There’s no need to submit rent receipts, medical bills, or travel vouchers—it’s automatically applied.

This provision was first introduced in Budget 2018, replacing tax exemptions on transport allowance and medical reimbursement. Here’s how the deduction evolved over the years:

*Standard deduction was extended to the new tax regime from FY 2023–24 onward.

So, what changed in 2024–25? The central government, in the interim Budget 2024, increased the standard deduction to ₹75,000, but only under the new tax regime. The old regime continues to offer ₹50,000. This strategic change was aimed at pushing more salaried individuals toward the default tax structure.

For more context, the official budget speech and updates are publicly available on the Income Tax India portal and through trusted sources like The Hindu BusinessLine.

Why It Matters More Than Ever in 2024–25

With inflation eating into take-home income, every rupee saved from tax counts. For someone earning ₹12,00,000 annually under the new regime, this ₹75,000 deduction reduces taxable income to ₹11,25,000—saving ₹19,500 directly in taxes (at the 30% slab).

Here’s a simplified scenario:

This shows that even a flat amount, when scaled across salary brackets, provides a meaningful cushion—without paperwork or compliance burden.

Who Can Claim the Standard Deduction?

This deduction is not just limited to salaried professionals. If you fall under any of the categories below, you are entitled to it automatically:

• Employees receiving income under the head “Salaries”
• Pensioners, both central/state government and private retirees

There’s no age bar or income limit for eligibility. However, the amount you receive cannot exceed your total salary or pension. For instance, if you earn ₹40,000 as a monthly pension (₹4,80,000 annually), you can only claim the deduction up to that extent, not more.

Old vs New Tax Regime: Where Does Section 16(ia) Fit In?

One of the most debated choices among salaried taxpayers today is selecting the right tax regime. The introduction of the standard deduction under Section 16(ia) to the new tax regime from FY 2023–24, and its subsequent increase to ₹75,000 from FY 2024–25, has added a new layer to this decision-making process.

Here’s a clear comparison between the two regimes:

The new regime offers a simplified structure—fewer exemptions, but reduced slab rates. With the higher standard deduction, it aims to attract middle-income earners by lowering the tax burden without requiring documentation.

Tax experts have noted that for individuals not availing major deductions like housing loan interest or Section 80C investments, the new regime may now be more beneficial, particularly after factoring in the increased deduction under 16(ia). According to recent analysis by Moneycontrol, this move is expected to nudge more salaried taxpayers toward the default framework.

How Much Can You Actually Save?

To better understand the real impact of the revised standard deduction on tax liability, consider the examples below. These illustrate approximate tax savings for individuals under both regimes:

These numbers indicate that the new regime can often outperform the old, especially when your annual investments and deductions are limited. However, individual results will vary depending on specific exemptions and income structure.

Tools like the official Income Tax Calculator by Income Tax Department can help simulate and compare actual outcomes.

What If You’re a Pensioner?

Retired individuals often wonder if they qualify for the same benefits. The good news is: yes, pension income (excluding family pension) is considered “salary” for tax purposes and qualifies for the standard deduction under Section 16(ia).

However, family pension falls under “Income from Other Sources” and does not qualify for this deduction. This distinction is crucial for planning tax outgo post-retirement. It’s advisable for pensioners to check their Form 16 or Pension Slip to ensure proper deduction is reflected before filing their return.

Should You Switch to the New Tax Regime Now?

With the ₹75,000 standard deduction now applicable in the new tax regime, the answer may be yes—but only if:

• You do not claim major deductions under 80C, 80D, or HRA
• Your salary structure is straightforward
• You fall into higher income brackets

That said, switching regimes is not mandatory. Taxpayers can continue under the old regime if they find it more beneficial. But remember, under the new regime, the standard deduction is built-in, so even without claiming anything manually, you still receive the ₹75,000 benefit.

How to Claim Standard Deduction Under Section 16(ia)

One of the biggest advantages of the standard deduction under Section 16(ia) is its automatic applicability. Salaried individuals and pensioners do not need to submit any separate forms, declarations, or supporting documents to claim this deduction. It is pre-adjusted by the employer while computing taxable salary.

For Salaried Employees

• Employers usually apply the deduction while preparing Form 16, which is issued annually.
• It appears in Part B of Form 16, typically under the “Deductions under Section 16” heading.
• This amount is subtracted from the gross salary before final tax liability is computed.
• Even if you change jobs within a financial year, each employer will apply the deduction separately, but the total combined claim during ITR filing should not exceed the limit (₹50,000 or ₹75,000 depending on regime).

For Pensioners

• Pensioners receiving income directly from a former employer (like government or PSUs) can also claim the deduction, as pension is treated as salary income.
• The Income Tax Return (ITR) should be filed under the “Salary” head to ensure the deduction is included.
• Those receiving pension via banks can use statements to determine gross pension and manually apply the deduction while filing.

For a detailed breakdown of how this deduction is handled in Form 16, the NSDL website offers a comprehensive format guide.

Where to Find It in Form 16

Most taxpayers are unsure where exactly the standard deduction appears. Below is a snapshot-style layout to understand how it is reflected:

Employers typically show this in the deductions section, just before calculating taxable income. In many organizations, especially government departments, it may also be printed on the salary slip issued at year-end.

The Income Tax India e-filing portal allows salaried individuals to pre-fill this deduction in their ITR based on TDS and Form 16 details uploaded by employers.

Mistakes to Avoid While Claiming the Deduction

While the deduction is automatic, taxpayers must ensure no errors occur during tax filing. Some common issues to watch out for:

• Over-claiming: If you’ve switched jobs mid-year, ensure total deduction doesn’t exceed ₹50,000 or ₹75,000.
• Wrong Income Head: Pensioners must file pension income under “Salaries” to avail this benefit. Filing it under “Other Sources” will make the deduction invalid.
• Choosing the Wrong Regime: Remember that ₹75,000 is available only in the new tax regime. Under the old regime, it’s capped at ₹50,000.

To stay compliant and accurate, consider using government-recognized platforms or consulting with a professional before submitting your final return.

What to Do If Employer Hasn’t Applied It

There are instances where employers fail to apply the deduction in Form 16, especially in smaller private firms or contractual setups. If that happens:

• You can still claim it manually while filing your ITR.
• Use the appropriate deduction field under “Salary Schedule” in the form.
• Keep a copy of your salary slip or appointment letter stating you are a salaried employee.

The Income Tax Department does not require physical proofs for this deduction, but proper income classification and form usage are critical.

The ₹75,000 Standard Deduction: Is It Enough in 2024–25?

While the increase in the standard deduction under Section 16(ia) to ₹75,000 under the new tax regime has been widely welcomed, many financial experts believe this figure still doesn’t match real-world inflation and rising living costs. Over the last few years, fuel prices, healthcare expenses, and household necessities have significantly increased, eroding the actual value of such fixed deductions.

In fact, the original ₹40,000 deduction introduced in 2018 was considered a substitute for transport allowance and medical reimbursement, both of which were previously exempt under separate provisions. If the same figure had been adjusted for inflation annually, it would likely be much higher by now.

Inflation Impact: Then vs Now

To understand the erosion in purchasing power, let’s compare the real value of the standard deduction from 2018 to 2024 using India’s average annual inflation rate:

Based on CPI inflation data sourced from RBI’s official database and adjusted conservatively at ~6% per annum.

While the current deduction comes close to neutralizing the inflation impact, it’s important to recognize that this adjustment has been reactive, not indexed. Unlike allowances such as Dearness Allowance (DA), the standard deduction has no formula to automatically increase with cost-of-living changes.

Growing Demand for Indexation and Higher Limits

Several economists and tax advisory forums have recommended indexing the standard deduction to the Consumer Price Index (CPI), so that it automatically adjusts with rising expenses, similar to how income tax slabs are periodically updated.

• The All India Federation of Tax Practitioners has called for annual revision mechanisms to be built into the law.
• Budget memorandums submitted to the Ministry of Finance by advisory firms like Deloitte and PwC also emphasize the need to revisit fixed deductions.

A 2023 analysis published by The Economic Times noted that salaried taxpayers bear a disproportionate tax load compared to business professionals, primarily because salaried individuals cannot claim most expenses as deductions.

Why It Still Matters Despite Limitations

Despite the debate around adequacy, the standard deduction under Section 16(ia) remains one of the most beneficial and effortless tax reliefs for salaried individuals:

• No documentation or compliance hassles
• Applies automatically—you don’t need to file any extra claims
• Offers savings across income brackets, without the burden of proof

For someone in the 30% slab, the ₹75,000 deduction directly saves ₹22,500 in tax, which is a significant relief especially for middle-class earners.

Moreover, the fact that this deduction is now included in the default tax regime ensures that even first-time taxpayers or less financially literate individuals benefit from it without any active decision-making.

Questions on Standard Deduction Under Section 16(ia)

Even though this deduction is one of the simplest and most universal benefits for salaried individuals and pensioners, there are still several common doubts and misconceptions. Addressing these FAQs helps clarify how and when the deduction applies—and avoids missed opportunities or filing errors.

Can I claim this deduction if I’ve worked with more than one employer in the same year?

Yes, you can. However, the total deduction claimed under Section 16(ia) cannot exceed the allowed limit of ₹50,000 (old regime) or ₹75,000 (new regime) for the full financial year, regardless of the number of employers. While each employer may have already applied it in their respective Form 16, you must reconcile the total salary and deduction during ITR filing.

Does this deduction apply to freelance or self-employed professionals?

No. Only individuals receiving income under the head “Salaries” are eligible. Self-employed professionals, freelancers, and consultants cannot claim this deduction, as their income is taxed under the “Profits and Gains from Business or Profession” head. You can learn more about classification of income heads on the Income Tax Department’s guide.

Can family pensioners claim this deduction?

Family pensioners are not eligible for the standard deduction under Section 16(ia), since family pension is considered “Income from Other Sources” under the Income Tax Act. However, they may be eligible to claim a separate deduction of ₹15,000 or one-third of pension amount (whichever is lower) under Section 57(iia), as confirmed in official tax interpretations.

Will the deduction appear automatically in my pre-filled ITR?

In most cases, yes. For salaried employees, the deduction should be reflected in the pre-filled return based on TDS data and Form 16 details uploaded by the employer. However, it is always advisable to verify and manually enter or adjust if you notice it missing or miscalculated.

Summary Table of Key Rules (At a Glance)

Why You Should Not Ignore This Deduction

With minimal effort, the standard deduction under Section 16(ia) offers consistent annual tax savings. Even in scenarios where you are not investing in tax-saving schemes or eligible for HRA, this deduction ensures your taxable income is reduced automatically.

Moreover, the flat-rate nature of this benefit ensures equity across income groups, offering fixed savings regardless of whether you earn ₹7 lakh or ₹17 lakh. When paired with other tax reliefs like the rebate under Section 87A or new default tax slabs, it contributes meaningfully to optimizing your overall tax position.

Final Takeaways and Smart Next Steps for Taxpayers

The standard deduction under Section 16(ia) is not just another line item on your salary slip—it’s a powerful and accessible way to lower your tax burden with zero paperwork. Whether you’re a first-time employee, a seasoned professional, or a retired government pensioner, this fixed deduction delivers real monetary value every financial year.

With the limit increased to ₹75,000 for those opting into the new tax regime, salaried individuals now have stronger incentive to evaluate their total tax impact before locking in a regime choice. The automatic nature of this benefit means you won’t miss out—unless you file your return incorrectly or under the wrong income head.

For higher-income earners in the 20–30% slab, this deduction alone can lead to savings of ₹15,000 to ₹22,500 annually, depending on the regime selected. More importantly, it ensures fairness by offering relief to those who may not claim housing, education, or investment-linked exemptions.

If you haven’t yet reviewed how this applies in your case, or haven’t filed your return yet, start by:

• Checking your latest Form 16 or pension statement
• Reviewing pre-filled data on the Income Tax e-Filing portal
• Using an updated tax calculator to compare your old vs new regime outcomes

In Closing: Don’t Miss Out on a Guaranteed Benefit

Too many taxpayers ignore the value of the standard deduction under Section 16(ia) simply because it doesn’t require action. But understanding its implications, especially with the recent increase under the new regime, allows you to make smarter tax planning choices.

For professionals with limited scope to claim traditional deductions, this ₹75,000 flat reduction is a game-changer—especially when paired with zero-maintenance compliance. Don’t let it go unnoticed when filing your returns this year.

And if you’re unsure which tax regime works best for your salary profile, use tools and guides available from verified platforms like National Securities Depository Limited (NSDL) or Tax Information Network to get started.

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