What is Standard Deduction in Income Tax? Latest Rules, Benefits & Filing Guide 2025

Understand what is standard deduction in income tax and how it saves you ₹75,000. Get step-by-step guide, latest rules, FAQs, filing tips, old vs new regime benefits, and maximise your tax savings in FY 2025-26. Fully updated and beginner-friendly.

Understand the ₹75,000 standard deduction, Section 16 rules, who’s eligible, and how it compares in old vs new regime. Includes calculation examples and FAQs for FY 2024–25.

Introduction

Are you paying more tax than you should? The ₹75,000 standard deduction in FY 2024–25 can significantly cut your tax liability. Whether you’re a salaried professional or a pensioner, understanding this deduction helps you save more while staying compliant. This guide—optimized for clarity and SEO-rich content—provides everything you need: legal context, timeline, old vs new tax regime comparisons, worked examples, and expert tax planning tips. Expect a comprehensive, scannable, mobile-first format in clear Indian English.

What Is Standard Deduction?

A standard deduction is a flat tax deduction allowed under Section 16 of the Income Tax Act, aimed at simplifying tax calculations for salaried individuals and pensioners. Unlike itemised deductions, it doesn’t require receipts, which reduces paperwork while ensuring you don’t overpay.

How it works:

1. Deduct a fixed amount from your gross salary or pension.
2. Arrive at your taxable income.
3. Apply income tax slabs accordingly.

This deduction directly lowers your taxable income, saving you tax every year without fuss.

Key Milestones & Latest Changes

To fully grasp the impact of standard deduction, here’s a clear timeline:

The hike to ₹75,000 took effect from FY 2024–25 (Assessment Year 2025–26). Notably, this deduction applies under both old and new tax regimes—clarified by the Income Tax Department—giving taxpayers the flexibility to benefit either way.

How Much You Can Deduct

For FY 2024–25, the standard deduction stands firmly at ₹75,000
—up from ₹50,000 last year. This change was announced in the 2024 Union Budget, and is available to both current salaried individuals and pensioners.

According to the Income Tax Department FAQs, all salaried, pension-receiving individuals are eligible, irrespective of the tax regime they choose. This ensures everyone benefits from simplified deductions when filing returns.

Why It Matters (what is standard deduction in income tax)

Knowing what is standard deduction in income tax is essential—not just for saving money but also for smarter tax planning. This deduction:

• Reduces tax paperwork dramatically;
• Decreases taxable income straight away;
• Helps with clearer budget planning each fiscal year.

By deducting ₹75,000 early, your tax outflow decreases measurably, especially across middle income brackets (5–20%). And unlike other deductions, it requires no proof or documentation—just a mention in Form 16 or Form 10A.

Stay Ahead with the Latest Legal Details

For a full understanding of the legislative roots, the official tax guideline under Section 16 is available on the central government’s tax portal. Similarly, updated government documents on Budget 2024 breakdown the ₹75,000 change and its application in the new tax regime—helping you stay ahead.

Visit the Income Tax e-filing portal for Section 16 provisions and the Ministry of Finance site for Budget 2024 specifics.

What to Expect Next

In the upcoming sections (20–40% of this article), we will:

• Compare old vs new tax regimes, laying out the deductions allowed under each.
• Provide a step-by-step calculation of taxable income with examples.
• Define eligibility criteria, including pensioner rules and multi-employer scenarios.
• Share tax-planning strategies, combining standard deduction with popular options like Section 80C and 80D.
• Finally, walk you through the claim process—from Form 16 to ITR filing.

Old vs New Tax Regime: A Clear Comparison

Understanding what is standard deduction in income tax also means choosing the right tax regime. Both the old and the new regimes allow the ₹75,000 standard deduction, but they differ in total deductions and allowances.

Key insight: Although both regimes provide the same standard deduction, the old regime allows additional deductions such as Section 80C and 80D, often making it more beneficial for those with investments or insurance. However, the new regime has simpler tax slabs and may be better suited for taxpayers with minimal deductions.

Step-by-Step Taxable Income Calculation

Let’s walk through a practical example to illustrate how the standard deduction impacts your taxable income.

Scenario:

• Annual salary: ₹12,00,000
• Pension or other income: ₹0

Old Regime Calculation:

1. Gross Salary: ₹12,00,000
2. Less standard deduction: ₹75,000
3. Taxable Income: ₹11,25,000

New Regime Calculation:

• Identical subtraction of ₹75,000, leading to taxable income of ₹11,25,000
• No further deductions applicable under this regime

Tax Computation (old regime):

• Tax on ₹11,25,000:
  • 0–₹3,00,000: Nil
  • ₹3,00,001–₹6,00,000: 5%
  • ₹6,00,001–₹11,25,000: 20%
• Add 4% cess

The standard deduction alone saves you ₹15,600 in tax compared to the previous ₹50,000 deduction—a clear benefit when incorporated early in your tax planning.

Income Tax Calculator

(Old vs New Tax Regime Calculator)

Eligibility: Who Can Claim?

If you’re wondering what is standard deduction in income tax and who can avail it, here’s a full breakdown:

• Eligible:
  • Salaried individuals
  • Pensioners (family pension also covered up to ₹25,000, increased from ₹15,000)
• Not eligible:
  • Self-employed or business professionals
  • Agricultural income recipients (unless salaried/pension income exists)
• Other scenarios:
  • Multiple employers? Claim a single standard deduction across total salary.
  • Changed jobs during the year? Combine salaries and apply deduction just once.

The Income Tax Department FAQ document confirms standard deduction availability in both regimes.

Benefits & Tax-Planning Strategies

Understanding what is standard deduction in income tax empowers smarter financial planning. Here are some top benefits and tactics:

1. Immediate Tax Relief
   A straight ₹75,000 reduction reduces your taxable base, saving tax from the moment it’s applied.
2. Paperless & Hassle-Free
   No bills or receipts needed—just a claim in Form 16 or ITR.
3. Strategic Combo in Old Regime
   Combine with:
   • 80C for investments up to ₹1.5 lakh
   • 80D for health insurance premiums
   • HRA, LTA, and other allowances
     The deduction can easily exceed ₹2 lakh.
4. Simplified Filing in New Regime
   Keep it straightforward with only standard deduction and base tax slabs.
5. Customised Planning
   Choose the regime that best aligns with your deductions and potential tax outflow.

What You Should Do Now

• Check your Form 16: Ensure it reflects the ₹75,000 standard deduction—most employers update this automatically.
• Use a verified tax calculator or spreadsheet to compare tax liability under both regimes.
• Claim in ITR filing: Carefully mention the deduction in the ITR form; no additional proof is required.

As the Budget 2024 PDF explains, the standard deduction increase is a direct policy change applicable from FY 2024–25, intended to benefit over four crore Indian taxpayers.

Standard Deduction for AY 2025-26: Latest Income Tax Rules, Eligibility & Calculation

Step-by-Step Claim Process: How to Avail in Form 16 & ITR

Grasping what is standard deduction in income tax is one thing; ensuring you claim it correctly is another. Here’s a concise guide:

1. Form 16
   Employers include a line under Section 16 that specifies the standard deduction amount, so verify it reflects ₹75,000 for FY 2024–25.
2. Filing Your ITR
   • In ITR-1 or ITR-2, enter the gross salary or pension under “Income from Salary/Pension.”
   • In the “Deductions under section 16” field, mention ₹75,000.
   • No need for supporting documents, as standard deduction is automatic.
3. Changed Jobs?
   If you switched employers during the year, ensure totals are correctly merged in Form 16A/B, and claim a single ₹75,000 deduction—there’s no leeway to claim it per employer.
4. Pensioners
   Even if you did not work, pension counted as “income from salary” qualifies for ₹75,000. It appears in Form 16A and can be claimed just like regular salary.

Illustrative Filing Table

Here’s how a filer entering data in Form 16 and ITR would reflect the standard deduction:

Multiple Employers & Deductions

If you worked with more than one employer:

• Combine salaries from all employers.
• Deduct ₹75,000 only once.
• Verify total standard deduction is not more than ₹75,000 in the final ITR form.

This avoids common errors like over-deduction flagged by the tax e-filing portal.

Helpful Official References

For accurate details on claiming standard deduction and salary income details, consult:

• The e-filing portal’s instructions for ITR forms which detail income and deduction entries.
• The Central Board of Direct Taxes (CBDT) circulars explaining Form 16 and standard deduction guidelines.

These references align with your search intent for what is standard deduction in income tax, ensuring correct filing.

Common Concerns Clarified

Can I claim ₹75,000 standard deduction and Section 80C together?

Yes. The standard deduction is separate. You can still invest up to ₹1.5 lakh under Section 80C even when filing under the old regime, maximizing tax benefits.

Does the standard deduction apply to gratuity and pension?

Pension counts as salary and attracts standard deduction. Gratuity is addressed under Section 10(10), not Section 16, so it doesn’t affect the standard deduction limit.

What if I filled ₹50,000 instead of ₹75,000?

Filing ₹50,000 unknowingly means you’re missing extra savings. Consider revising your return or claim the balance in the next ITR window.

Does the new regime need declaration for standard deduction?

Yes. Despite fewer allowances in the new regime, you must still declare ₹75,000 as standard deduction in the ITR form—it’s not automatic.

Advanced Tax Planning: Regime Comparison & Investment Strategies

Understanding what is standard deduction in income tax goes beyond the ₹75,000 benefit—it’s about making smart choices for your overall tax outcome. Here’s how to optimise your strategy by comparing regimes and planning investments.

Old vs New Regime: Final Tax Liability Comparison

The standard deduction features in both regimes, but total deductions differ significantly. Let’s evaluate typical scenarios:

*Assuming maximum investments under 80C and insurance under 80D.

The standard deduction in income tax is foundational in both cases, but choosing investments wisely in the old regime can reduce your taxable income further. If you’re not using 80C or 80D, the new regime’s simplicity may be more attractive.

Combining Standard Deduction with Other Savings

Here are top strategies to combine the ₹75,000 standard deduction with other tax-saving tools:

1. Maximise Section 80C
   • Use instruments like PPF, EPF, ELSS, and home loan principal.
   • Up to ₹1.5 lakh.
2. Use Section 80D
   • Health insurance premiums qualify under 80D.
   • Combined with family coverage, it offers significant reduction.
3. Include HRA & LTA in Old Regime
   • Claim actual rent paid for HRA deduction.
   • Utilize LTA when travelling.
4. Pensioners: Combine Gratuity and Standard Deduction
   • Pension qualifies for ₹75,000 deduction; gratuity is exempt under Section 10(10).
   • Leads to zero taxable pension in many cases.
5. Smart Regime Switching
   • Use an online tax calculator to compare regimes.
   • Opt for the regime that yields lowest tax after considering standard deduction and investments.

For a reliable way to compare both regimes, you can use the tax calculator available on the official Income Tax Portal.

Real-Life Case Study

Arjun’s Salary Breakdown

• Annual salary: ₹15 lakh
• EPF contribution (80C): ₹1.5 lakh
• Health insurance premium (80D): ₹25,000

Old Regime Taxable Income Calculation:

• Salary: ₹15,00,000
• Less standard deduction: ₹75,000
• Less 80C: ₹1,50,000
• Less 80D: ₹25,000
• Net taxable income: ₹12,50,000

New Regime Taxable Income Calculation:

• Salary: ₹15,00,000
• Less standard deduction: ₹75,000
• Net taxable income: ₹14,25,000

Conclusion:

Arjun saves significantly more tax under the old regime due to combined deductions—standard plus additional allowances and investments.

Tips for Maximising Standard Deduction Benefits

1. Double Check Form 16
   • Ensure ₹75,000 standard deduction is properly reflected.
2. Utilise Investments
   • Pair the standard deduction with 80C and 80D for maximum tax saving.
3. Evaluate Regimes Annually
   • Changes in salary or investments make regime comparison essential each year.
4. Avoid Overclaiming
   • Only claim ₹75,000 once, even if multiple employers exist.
5. File Accurately
   • Use reliable tax filing platforms or the official portal to avoid errors with deduction entries.

External Resources to Help You

• For step-by-step filing guidance and details on claiming salary and deductions, visit the ITR Instructions on the Income Tax Department portal.
• To verify standard deduction rules and associated circulars, consult the CBDT notifications.

These resources ensure your understanding of what is standard deduction in income tax remains accurate and up to date.

Visual Guide for Quick Reference

A simple flowchart to decide your optimal tax regime based on standard deduction usage:

Start → Do you invest under 80C/80D?

• If Yes → Choose Old Regime → Claim ₹75k + other deductions
• If No → Choose New Regime → Claim ₹75k only

This ensures your understanding of what is standard deduction in income tax remains crystal clear and actionable.

Integrating With Additional Deductions

Beyond the ₹75,000 standard deduction, here are additional tax-saving opportunities:

• Section 80G: Donations to approved charities
• Section 80TTA/80TTB: Interest income from savings accounts and deposits
• Section 24(b): Home loan interest under old regime

Combining these can significantly reduce tax liability—sometimes by over ₹2 lakh if structured correctly.

What You Should Do Now

1. Download a tax planning worksheet based on standard deduction and 80C/80D limits.
2. Use the tax calculator on the official portal to analyze old vs new regime outcomes for your income.
3. Consult a tax professional if irregular allowances, bonuses, or multiple income streams make calculation complex. Reliable guidance is available on the Chartered Accountants Institute website.

Final Takeaways & Tools

Before you complete your ITR—with clarity on what is standard deduction in income tax—here’s a definitive checklist and tools to guide your filing:

Quick Checklist

Final Thought

Understanding what is standard deduction in income tax is more than knowing the figure—it’s about making it work effectively for you. ₹75,000 is a simple, proof-free deduction that benefits both regimes. When combined with thoughtful investment under Sections 80C, 80D, 80G, and home loan relief under 24(b), the tax savings can multiply.

Be meticulous in claiming it, update your Form 16, choose the right regime, and file early. Your tax filing should be fast, compliant, and optimized for real savings.

FAQ