Standard Deduction for Salaried: Amounts, Slabs, and Regime Choice

For salaried employees and pensioners, the standard deduction for salaried taxpayers is ₹75,000 under the new tax regime and ₹50,000 under the old tax regime.1Press Information Bureau. Government Makes New Tax Regime More Attractive The amount is flat, automatic, and requires no receipts. Which regime leaves you with more money depends on how many other deductions you can stack under the old regime to beat the new regime’s larger standard deduction and lower slab rates.

Who Can Claim It

The standard deduction is available to anyone whose income falls under the “Salaries” head of the Income Tax Act. Full-time employees, part-time employees, and pensioners all qualify, because pension income is treated as salary for tax purposes.

Freelancers, independent contractors, and business owners cannot claim it. Their earnings sit under business or professional income, which uses a different set of deductions. If your money comes through a payroll system or a pension disbursement, the deduction applies. If it doesn’t, it doesn’t.

The Two Amounts Side by Side

Starting from Assessment Year 2025-26, the two regimes offer different standard deduction amounts:

The ₹75,000 figure under the new regime came in with Union Budget 2024, raised from the earlier ₹50,000 that had applied uniformly since the deduction was reintroduced in 2018. The old regime’s ₹50,000 limit has not moved. If your annual salary is below the deduction threshold, you can only deduct the actual salary amount under either regime.

Nothing needs to be submitted to claim it. The e-filing portal applies the deduction automatically once you enter your salary details and select your regime.

Why the Gap Matters: Slabs and the Zero-Tax Threshold

The ₹25,000 difference in the standard deduction is only part of the story. Budget 2025 rewrote the new regime’s slab rates and left the old regime’s rates alone.

New Regime Slabs (FY 2025-26 / AY 2026-27)

  • Up to ₹4,00,000: Nil
  • ₹4,00,001 to ₹8,00,000: 5%
  • ₹8,00,001 to ₹12,00,000: 10%
  • ₹12,00,001 to ₹16,00,000: 15%
  • ₹16,00,001 to ₹20,00,000: 20%
  • ₹20,00,001 to ₹24,00,000: 25%
  • Above ₹24,00,000: 30%

Old Regime Slabs (Individuals Below 60)

  • Up to ₹2,50,000: Nil
  • ₹2,50,001 to ₹5,00,000: 5%
  • ₹5,00,001 to ₹10,00,000: 20%
  • Above ₹10,00,000: 30%

Budget 2025 also enhanced the Section 87A rebate so that salaried individuals earning up to ₹12,75,000 a year under the new regime pay no tax at all. Subtract the ₹75,000 standard deduction, and any taxable income of ₹12,00,000 or less gets the full tax amount rebated to zero.3Press Information Bureau. No Income Tax on Annual Income Upto Rs. 12 Lakh

For anyone around ₹1 lakh a month or below, the new regime wins without needing any investments or insurance. Reaching zero tax at the same income under the old regime would require stacking substantial Section 80C, 80D, and similar deductions.

What the Old Regime Lets You Add

The old regime’s ₹50,000 standard deduction is smaller, but it sits inside a wider toolkit. Taxpayers who stay with the old regime can also claim:

  • Section 80C: up to ₹1,50,000 for PPF, ELSS, life insurance premiums, EPF contributions, and similar instruments
  • Section 80D: health insurance premiums, up to ₹25,000 for self and family, with higher limits for senior citizen parents
  • House Rent Allowance: partial exemption for rent paid, based on salary and city of residence
  • Leave Travel Allowance: exemption for domestic travel expenses
  • Section 24(b): interest on a home loan, up to ₹2,00,000 a year for a self-occupied property

The new regime strips almost all of these away. The few that survive include the standard deduction itself and employer contributions to the National Pension System under Section 80CCD(2), capped at 14% of basic salary under the new regime.2Income Tax Department. FAQs on New Tax vs Old Tax Regime

As a rough guide, if your old-regime deductions (not counting the standard deduction) add up to less than about ₹3,00,000 to ₹4,00,000 a year, the new regime usually leaves you with more. Above that range, the old regime can still come out ahead. The exact crossover shifts with income, so running the numbers both ways before filing is worth the time.

Picking a Regime and Switching Each Year

Since AY 2024-25, the new regime is the default. If you file your return without actively selecting a regime, the new one applies.4Income Tax Department. Salaried Individuals for AY 2026-27 That catches out people who have filed under the old regime for years and assume continuity.

Salaried individuals without business income have real flexibility. You can switch between regimes every single year, and the choice is made directly inside ITR-1 or ITR-2 while filing. No separate form, no lock-in.5Income Tax Department. Form 10-IEA FAQ

One deadline matters. The regime choice only counts if the return is filed by the Section 139(1) due date, which for most salaried individuals is July 31 following the end of the financial year. File late and the old regime is off the table for that assessment year.

A Small Addition Under Both Regimes: Professional Tax

Section 16 of the Income Tax Act actually holds three deductions: the standard deduction under Section 16(ia), an entertainment allowance deduction mainly relevant to government employees, and professional tax under Section 16(iii).

Professional tax is a state levy on salaried individuals, capped at ₹2,500 a year by the Constitution. Some states, including Delhi and Haryana, don’t charge it at all. Where it applies, the employer usually deducts it from your salary, and you can claim it on top of the standard deduction. This works under both regimes.

So in a state that charges professional tax, the combined Section 16 claim can reach ₹77,500 under the new regime or ₹52,500 under the old. The amount is modest, and since the employer handles the deduction already, there is no reason to leave it unclaimed.