Standard Deduction for Tax Year 2026-27 — ₹75,000 for Salary and Pension under the Income-tax Act, 2025
Quick Answer
For tax year 2026-27, the Income-tax Act, 2025 (30 of 2025), as amended by the Finance Act, 2026, allows a flat standard deduction of ₹75,000 under the default new regime and ₹50,000 under the opt-out old regime to every salaried employee and pensioner, with no documentation required. Family pensioners get ₹25,000 (new) / ₹15,000 (old) against their family pension. Combined with the ₹60,000 rebate, the standard deduction pushes the effective nil-tax gross salary under the new regime to ₹12,75,000. It is not available on business, professional or consulting income.
Last Updated: 15 April 2026 | Applicable From: Tax Year 2026-27 (1 April 2026 onwards) | Reference: Income-tax Act, 2025 (30 of 2025), as amended by Finance Act, 2026
The standard deduction is the quiet workhorse of Indian salary taxation. It does not grab headlines the way the ₹60,000 rebate does, but for every salaried employee and pensioner in the country it provides an unconditional, no-questions-asked subtraction from gross salary before the slab calculation. For the roughly 60 million salaried taxpayers of India, the standard deduction is the first line entry in the tax computation — and the Income-tax Act, 2025 retains it, at enhanced levels.
This guide explains exactly how much standard deduction is available under each regime for tax year 2026-27, who qualifies, how it interacts with the ₹60,000 new-regime rebate, the specific family pension standard deduction, treatment of pensioners, worked examples at a range of income levels, and the history of how the deduction reached its current ₹75,000 level. It is written for salaried professionals, pensioners, family pensioners, and employers running payroll systems that must reflect the correct deduction in monthly TDS.
Definition — Standard deduction: A flat, statutory deduction from income chargeable under the head “Salaries” that is granted irrespective of actual expenditure incurred in earning the salary. Under the Income-tax Act, 2025, the standard deduction for salaried employees and pensioners is ₹75,000 (new regime) or ₹50,000 (old regime). It is distinct from, and in addition to, the specific allowances exempted under Section 10-equivalent provisions of the Act.
The Income-tax Act, 2025 (commencing 1 April 2026) grants a standard deduction of ₹75,000 to every salaried individual and pensioner taxed under the default new regime. Those who opt out of the new regime via Form 10-IEA receive ₹50,000 under the old regime. The deduction is automatic, requires no bills or proofs, and is applied by the employer in monthly TDS computation under Sec 192 and again by the taxpayer at return filing. A separate, smaller standard deduction of ₹25,000 (new regime) or ₹15,000 (old regime) is available to recipients of family pension from “Income from Other Sources”. The deduction is NOT available on self-employment, consulting, or business income. Combined with the ₹60,000 new-regime rebate, the standard deduction creates an effective zero-tax threshold of ₹12,75,000 of gross salary for resident individuals.
Table of Contents
- Amounts at a glance
- Eligibility — who gets the deduction
- Pensioners vs family pensioners
- New regime vs old regime
- Interaction with the ₹60,000 rebate
- Worked examples
- History of the standard deduction
- Multiple employers in one tax year
- Planning and edge cases
- Expert Insight
- Key Takeaways
- Frequently Asked Questions
1. Amounts at a glance
| Income type / regime | New regime (default) | Old regime (opt-out) |
|---|---|---|
| Salaried employee (under “Salaries”) | ₹75,000 | ₹50,000 |
| Pensioner (pension under “Salaries”) | ₹75,000 | ₹50,000 |
| Family pensioner (under “Other Sources”) | ₹25,000 or ⅓ of pension (lower) | ₹15,000 or ⅓ of pension (lower) |
| Business / professional income | Not available | Not available |
| Consulting / freelance (PGBP) | Not available | Not available |
The ₹25,000 gap between new-regime ₹75,000 and old-regime ₹50,000 was introduced by the Budget 2024 and carried forward into the Income-tax Act, 2025 via the Finance Act, 2026 amendments. Similarly, the family-pension standard deduction was increased from ₹15,000 to ₹25,000 under the new regime.
2. Eligibility — who gets the deduction
Eligibility depends on whether the income is chargeable under the head “Salaries”. The Income-tax Act, 2025 retains the five heads of income from the repealed 1961 Act. “Salaries” includes:
- Wages, salary, basic pay, dearness allowance, bonus, commission, perquisites and profits in lieu of salary paid by an employer to an employee under a contract of employment
- Pension paid by a former employer to a retired employee (including government, PSU, central, state and corporate pension)
- Any annuity received from a former employer in consideration of past employment
- Leave encashment, gratuity (in excess of statutory limits), and similar retirement benefits taxable as salary
Every taxpayer whose income under this head is positive gets the full ₹75,000 (new) or ₹50,000 (old) standard deduction. The deduction cannot exceed the amount of salary income — if salary is ₹40,000, the deduction is capped at ₹40,000.
The standard deduction does not apply to:
- Partners of a firm receiving remuneration (taxed under PGBP — business or profession)
- Freelancers, consultants, and retainer professionals invoicing clients (taxed under PGBP)
- Directors who are not employees receiving sitting fees (taxed under “Other Sources”)
- Commission agents not in an employer-employee relationship (taxed under PGBP)
- Self-employed persons, traders, and business owners
- Recipients of family pension (they get a separate, smaller standard deduction — see below)
3. Pensioners vs family pensioners — a critical distinction
A retired employee receiving pension from their former employer is, for income-tax purposes, a salaried person. The pension is chargeable under “Salaries” and attracts the full ₹75,000 (new) or ₹50,000 (old) standard deduction. This covers government pensioners, PSU pensioners, EPS pensioners under EPFO, and corporate pensioners alike.
A family pensioner is different. When a pensioner dies, their dependant (usually the spouse, sometimes a child or parent) may receive a family pension. This income is NOT salary — it is chargeable under “Income from Other Sources”. The Income-tax Act, 2025 grants a special standard deduction against family pension, equal to the lower of ₹25,000 (new regime) / ₹15,000 (old regime) or one-third of the family pension. For example, on a family pension of ₹60,000 per year, ⅓ is ₹20,000 and the deduction is ₹20,000; on a family pension of ₹90,000, ⅓ is ₹30,000 but the deduction is capped at ₹25,000.
4. New regime vs old regime
In the earlier era of the 1961 Act, there was a period when the new regime did not allow the standard deduction at all. That disadvantage was removed by the Finance Act, 2023, and Budget 2024 went further and raised the new-regime amount to ₹75,000, making the new regime effectively more generous than the old regime on standard deduction alone. The Income-tax Act, 2025, as amended by the Finance Act, 2026, carries these amounts forward unchanged for tax year 2026-27.
The ₹25,000 gap favours the new regime, but in isolation is modest. Where the new regime strongly wins is in combination with the ₹60,000 rebate. A salaried taxpayer on ₹12.75 lakh gross salary pays zero tax under the new regime versus roughly ₹1.33 lakh under the old regime (even after maxing out 80C and 80D). See our comprehensive slabs comparison guide for the full analysis.
5. Interaction with the ₹60,000 rebate
The standard deduction is applied before the slab calculation. The ₹60,000 rebate is applied after the slab calculation. Their combined effect on a salaried taxpayer is best shown by example:
Step 1 — Gross salary: ₹12,75,000
Step 2 — Less standard deduction ₹75,000
Step 3 — Taxable salary: ₹12,00,000
Step 4 — Slab tax on ₹12 lakh: ₹60,000 (₹20,000 at 5% + ₹40,000 at 10%)
Step 5 — Less rebate ₹60,000
Step 6 — Net tax: ₹0
Step 7 — Cess: ₹0
Without either component, the nil-tax ceiling collapses. Without the ₹75,000 standard deduction, the effective ceiling drops from ₹12.75 lakh to ₹12 lakh of gross salary. Without the ₹60,000 rebate, the nil-tax ceiling drops to ₹4 lakh (the basic exemption). The two components together multiply the tax saving, which is the precise design intent. For a deep dive on the rebate mechanics, see our article on the ₹60,000 rebate and the ₹12 lakh tax-free threshold.
6. Worked examples
Gross ₹6,00,000 − SD ₹75,000 = Taxable ₹5,25,000. Slab tax ₹6,250. Rebate ₹6,250. Net tax ₹0.
Same under old regime: ₹6,00,000 − ₹50,000 = ₹5,50,000. Slab tax ₹22,500. Rebate ₹0 (income > ₹5 lakh). Tax ₹22,500 + cess ₹900 = ₹23,400.
Gross ₹18,00,000 − SD ₹75,000 = Taxable ₹17,25,000. Slab tax = ₹20,000 + ₹40,000 + ₹60,000 + ₹25,000 (20% on ₹1.25 lakh) = ₹1,45,000 + cess ₹5,800 = ₹1,50,800.
Without the ₹75,000 standard deduction, slab tax would be ₹1,55,000 + cess = ₹1,61,200 — a saving of ₹10,400 from the deduction alone.
Gross pension ₹10,00,000 − SD ₹75,000 = Taxable ₹9,25,000. Slab tax = ₹20,000 + ₹12,500 = ₹32,500. Rebate ₹32,500. Net tax ₹0.
Family pension ₹90,000. Standard deduction: lower of ⅓ (₹30,000) or ₹25,000 = ₹25,000. Taxable family pension ₹65,000. Below basic exemption limit of ₹4 lakh ⇒ Net tax ₹0.
Salary: ₹14,00,000 − SD ₹75,000 = ₹13,25,000. Consulting income: ₹6,00,000 (no SD on PGBP). Total income ₹19,25,000. Slab tax = ₹20,000 + ₹40,000 + ₹60,000 + ₹65,000 (20% on ₹3.25 lakh) = ₹1,85,000 + cess ₹7,400 = ₹1,92,400.
7. History of the standard deduction
The standard deduction in salary taxation has a layered history in India:
- Pre-2005 — A statutory percentage-based standard deduction (33⅓% subject to cap, varying over time) existed for salaried employees under the 1961 Act
- 2005 — Finance Act, 2005 abolished the standard deduction, replacing it with the combination of transport allowance exemption (₹800/month) and medical reimbursement exemption (₹15,000/year)
- 2018 — Finance Act, 2018 reintroduced standard deduction at ₹40,000 and simultaneously withdrew transport allowance and medical reimbursement exemptions
- 2019 — Finance Act, 2019 raised standard deduction to ₹50,000
- 2023 — New tax regime made standard deduction available at ₹50,000 (previously was only in old regime)
- 2024 — Budget 2024 raised new-regime standard deduction to ₹75,000; family pension SD raised to ₹25,000
- 2026 — Income-tax Act, 2025 (as amended by Finance Act, 2026) retains ₹75,000 / ₹50,000 / ₹25,000 / ₹15,000
8. Multiple employers in one tax year
If you change jobs during the tax year, the total standard deduction is still ₹75,000 per taxpayer, not ₹75,000 per employer. Both employers may independently factor ₹75,000 into their TDS calculations if each is unaware of the other, resulting in combined TDS that is lower than actual liability and a self-assessment payment at year-end. Best practice is to submit Form 12B to the new employer listing salary and TDS from the previous employer — the new employer then issues consolidated TDS from a single ₹75,000 deduction base.
9. Planning tips and edge cases
- Salaried with side consulting? Structure as much of your income as possible through the salary employer rather than invoicing on the side. The ₹75,000 deduction applies only to salary.
- Retired and working as consultant? If you receive both pension (salary) and consulting fees (PGBP), the ₹75,000 deduction applies to the pension portion only.
- Two family pensions? The family pension standard deduction of ₹25,000 applies to the aggregate family pension, not per source. Consolidate before computing.
- New regime by default — if you take no action, the standard deduction is ₹75,000. Opting into the old regime drops it to ₹50,000 — factor this into your regime decision.
- Director fees — sitting fees to non-employee directors are “Other Sources”, not salary. No standard deduction. But remuneration to whole-time directors under employment contract is “Salaries”.
Related guides: slabs for tax year 2026-27, ₹60,000 rebate, surcharge and cess, deductions guide, HRA exemption calculation.
Expert Insight
CA V. Viswanathan: The standard deduction is the most taken-for-granted tax benefit in India, and that is precisely why I emphasise it with every new salaried client. Three practical observations from my Chennai practice. First, the difference between ₹75,000 new regime and ₹50,000 old regime is not “just ₹25,000” — it is ₹25,000 worth of taxable income reduction. At the 10% slab that saves ₹2,500; at 20% it saves ₹5,000; and for taxpayers who are on the edge of the ₹12 lakh rebate threshold, the extra ₹25,000 of deduction can be worth the entire ₹60,000 rebate itself. I have several clients whose gross salary moved from ₹12,50,000 to ₹12,80,000 during a year — those who had already mentally opted for the old regime were shocked to learn that the extra ₹30,000 of gross income turned into a full ₹75,000 of additional tax liability because they lost the full rebate by being in the old regime. Second, pensioner clients frequently forget that they still qualify for the standard deduction. I spend the first meeting with every retiree client confirming that their pension TDS is computed net of ₹75,000. Third — and this is a persistent source of error — clients who simultaneously receive salary and consulting fees often ask whether the consulting income qualifies. It does not. Income from profession (PGBP) is not “Salaries”, and the standard deduction is head-specific. Structure carefully. Finally, a reminder on the law: the Income-tax Act, 2025 assented on 21 August 2025 and commencing 1 April 2026 governs tax year 2026-27. Your FY 2025-26 salary is still under the repealed 1961 Act — this article applies to the salary you earn from 1 April 2026 onwards.
Key Takeaways
- Standard deduction for tax year 2026-27: ₹75,000 (new regime) / ₹50,000 (old regime) for salaried employees and pensioners.
- Family pension standard deduction: ₹25,000 (new) / ₹15,000 (old), capped at ⅓ of the family pension.
- Automatic — no bills, proof or receipts required.
- Not available on business, professional, consulting or freelance income.
- Applied before slab calculation and rebate.
- Combined with ₹60,000 rebate → zero tax up to ₹12.75 lakh gross salary.
- Single ₹75,000 cap per taxpayer even across multiple employers.
- Available to both resident and non-resident salaried individuals.
- The new-regime amount of ₹75,000 is higher than the old-regime ₹50,000 — an explicit nudge to the default regime.
- The Income-tax Act, 2025 commences 1 April 2026; these amounts apply from tax year 2026-27.
Frequently Asked Questions
What is the standard deduction for tax year 2026-27?
₹75,000 under the new regime, ₹50,000 under the old regime for salaried employees and pensioners. Family pensioners get ₹25,000 / ₹15,000.
Who is eligible?
Every taxpayer with income chargeable under the head “Salaries”, including private and public sector employees and pensioners receiving pension from a former employer.
Does it apply to pensioners?
Yes, full ₹75,000 (new) or ₹50,000 (old) applies to pension income. Family pension gets a separate smaller deduction.
Is it available under both regimes?
Yes, at different amounts: ₹75,000 new regime, ₹50,000 old regime.
Does it apply to business or consulting income?
No. Only income under the head “Salaries” qualifies. PGBP income does not.
How does it interact with the ₹12 lakh rebate?
Applied first to gross salary, the ₹75,000 SD brings taxable income to ₹12 lakh, on which the ₹60,000 rebate eliminates tax — effective nil-tax gross salary of ₹12.75 lakh.
What was the standard deduction before?
₹40,000 (2018), ₹50,000 (2019), and ₹75,000 (Budget 2024 for new regime) — retained by the Income-tax Act, 2025.
Do I need to provide proof?
No. It is a flat, formula-based deduction requiring no bills or receipts.
What is the family pension standard deduction?
₹25,000 (new) or ₹15,000 (old), capped at ⅓ of family pension. Applied under “Income from Other Sources”.
Can salary and pension SDs be claimed together?
No. The ₹75,000 is a per-taxpayer cap. Receiving both salary and pension still yields a single ₹75,000 deduction. Family pension SD is separate.
How much tax does it save?
₹7,500 at 10% slab; ₹15,000 at 20%; ₹22,500 at 30% — plus 4% cess. Crucially, it can push taxpayers under the ₹12 lakh rebate ceiling, compounding the saving.
What if I change jobs mid-year?
You still get only ₹75,000 in total for the tax year. Submit Form 12B to the new employer for accurate TDS, or reconcile at return filing.
Do state government employees get the deduction?
Yes, every salaried employee regardless of employer type. Same ₹75,000 / ₹50,000.
How does it differ from HRA exemption?
Standard deduction is flat and available under both regimes. HRA exemption is based on actual rent and available only under the old regime.
Does it apply to non-residents?
Yes. Non-residents get the standard deduction on Indian-taxable salary, but do not qualify for the ₹60,000 rebate.
For a tailored salary structure and regime choice review for tax year 2026-27, contact Virtual Auditor or call +91 99622 60333.