For the Financial Year (F.Y.) 2025-26, the standard deduction (https://itaxsoftware.net) for salaried individuals and pensioners under the new tax regime is ₹75,000.
This deduction is available for all eligible individuals regardless of their tax regime choice and does not require you to provide proof of expenses.
Key changes for F.Y. 2025-26
The standard deduction under the new regime was increased from ₹50,000 to ₹75,000 as part of the Union Budget 2024 (https://pranabbanerjee.com) , effective from F.Y. 2024-25 onwards.
In addition to the higher standard deduction, the Budget 2025 introduced other significant changes to the new regime for F.Y. 2025-26 (Assessment Year 2026-27):
Enhanced Rebate under Section 87A: The tax rebate under Section 87A has been increased to ₹60,000. This makes income up to ₹12 lakh tax-free for resident individuals, effectively raising the tax-exempt threshold for salaried employees to ₹12.75 lakh (after accounting for the ₹75,000 standard deduction).
Higher Basic Exemption Limit: The basic exemption limit under the new tax regime has been raised from ₹3 lakh to ₹4 lakh.
How the standard deduction works
Here is how the ₹75,000 standard deduction affects your tax calculation:
The standard deduction reduces your annual gross salary.
The remaining amount is your taxable income.
The applicable tax rates from the new tax slab are then applied to this taxable income.
Example:
Gross annual salary: ₹9,50,000
Less: Standard Deduction: ₹75,000
Taxable Income: ₹8,75,000
Income Tax (before rebate): ₹27,500
The new, higher rebate under Section 87A for income up to ₹12 lakh would then make this tax liability nil, depending on the specific circumstances.
Income Tax Slabs for Salaried Employees FY 2025–26