Standard deduction

The standard deduction is a flat deduction of Rs. 75,000 from salary and pension income under the default new tax regime, and Rs. 50,000 under the old regime, allowed to every salaried central government employee and pensioner without any bill, receipt or declaration. For the tax year 2026-27 the governing provision is serial number 2 of the Table in Section 19(1) of the Income-tax Act, 2025, which came into force on 1 April 2026.

That change of statute is the single most important thing to know about the deduction this year. Almost every guide, Form 16 template and departmental circular still calls it Section 16(ia), the provision of the Income-tax Act, 1961 that stood repealed from 1 April 2026. The amount did not move, so a computation prepared on the old numbering reaches the right figure, but the citation on a return, an appeal or a rectification for the tax year 2026-27 is Section 19.

Two features make the deduction the most misread item in a salary computation. It is regime-dependent, so the same person claims Rs. 75,000 or Rs. 50,000 depending on a choice made under Section 202(4). And it is one deduction per person, not one per employer or per source, which catches anyone who changes jobs mid-year or draws a pension alongside a re-employment salary. A family pension does not get it at all, and instead draws a much smaller deduction under Section 93(1)(d).

This article sets out the amounts and their statutory source, the position of a pensioner and a family pensioner, the Rs. 12.75 lakh tax-free arithmetic, worked examples, the two salary deductions that did and did not survive the 2025 Act, and the history that produced the figure. For the slabs, the rebate and the full computation, see income tax for government employees.

What the standard deduction is

The standard deduction is a deduction from income chargeable under the head “Salaries”, allowed by serial number 2 of the Table in Section 19(1) of the Income-tax Act, 2025. It requires no bill, no receipt, no investment and no documentary proof of any kind. Every salaried person, and every pensioner whose pension is charged as salary, gets it automatically once the salary or pension exceeds the deduction amount, and gets it restricted to the salary itself where it does not.

Section 19(1) works as a table rather than as prose. Column B names the nature of the sum deductible and column C states the amount, and for serial 2 column C reads: Rs. 75,000 or the salary, whichever is less, where income-tax is computed under Section 202(1), and Rs. 50,000 or the salary, whichever is less, in any other case. That drafting is why the deduction can never create a loss, a point the 1961 Act left to construction.

A pensioner is inside the head Salaries by two provisions read together. Section 15(2) of the Income-tax Act, 2025 provides that an employer includes a former employer, and Section 16(b) provides that salary includes any annuity or pension. So the monthly, uncommuted pension of a retired government employee is salary, and it carries the same Rs. 75,000 deduction as a serving employee’s pay. The commuted lump sum taken at retirement never enters this computation at all: it is separately and fully exempt for a government pensioner under serial number 7 of the same Section 19(1) Table, with no monetary ceiling; see commutation of pension.

Amounts for the tax year 2026-27

For the tax year 2026-27 the standard deduction from salary and pension is Rs. 75,000 in the new regime and Rs. 50,000 in the old, each capped at the salary itself.

The separate family pension deduction, for a dependant drawing a family pension after the death of the employee or pensioner, is set by Section 93(1)(d) and is much smaller:

The Union Budget 2026 changed none of these four figures, which have now stood since the tax year 2024-25. The old versus new tax regime comparison and the income tax slabs for assessment year 2027-28 cover the rate tables these deductions feed into.

The governing provision moved on 1 April 2026

The Income-tax Act, 2025 (Act No. 30 of 2025) received the President’s assent on 21 August 2025 and came into force on 1 April 2026, repealing the Income-tax Act, 1961 from that date. Income earned up to 31 March 2026 stays under the 1961 Act; the tax year 2026-27 is the first year computed under the new statute, so the tax year replaces the twin previous-year and assessment-year concepts.

For the standard deduction the renumbering is mechanical and the amounts are untouched:

One row in that table is a substantive change rather than a renumbering. The entertainment allowance deduction is abolished. Section 16(ii) of the Income-tax Act, 1961 had allowed a government employee, and no other class of taxpayer, the least of Rs. 5,000, one-fifth of basic salary, or the entertainment allowance actually received. The Income-tax Act, 2025 contains no such provision: the Table in Section 19(1) runs from professional tax at serial 1 and the standard deduction at serial 2 straight into the gratuity, commuted pension and leave encashment reliefs, with no entertainment allowance entry anywhere in the Act. A government employee on the old regime who claimed Rs. 5,000 under Section 16(ii) up to the tax year 2025-26 cannot claim it for 2026-27. The deduction was small, but it was the one Section 16 relief available exclusively to government service, and its removal is easy to miss because the standard deduction beside it carried over unchanged. See entertainment allowance.

The professional tax row survives but is regime-split. Serial number 1 of the Table allows a deduction for any sum paid by the assessee on account of a tax on employment levied under article 276(2) of the Constitution. Section 202(2)(a)(iv) then requires total income under the new regime to be computed without the deduction at serial number 1. So an employee on the default new regime still pays professional tax to the state government, because that liability has nothing to do with the income-tax regime, and gets no deduction for it. The standard deduction at serial 2 is not in the Section 202(2) exclusion list, which is why it is the one Section 19 deduction that survives in both regimes.

Application to an employee and a pensioner

The standard deduction is subtracted from gross salary, that is basic pay plus dearness allowance plus taxable allowances, before tax is computed on the balance. For a pensioner it is subtracted from the annual pension in the same way. Three rules decide how much a given person actually gets.

It is one deduction per person, not one per employer or per source. Someone who changes employer in the middle of a tax year, or draws both a salary and a service pension, or draws a service pension and a family pension together, gets a single Rs. 75,000 against the aggregate of the income chargeable under the head Salaries. The two employers may each allow it in their own tax deduction at source, which is the ordinary reason a taxpayer with two Form 16s finds a shortfall at filing; the fix is to report the combined salary to the later employer, or to pay the balance as self-assessment tax.

It cannot exceed the salary. Column C sets the deduction at Rs. 75,000 or the salary, whichever is less, so on a pension of Rs. 40,000 for the year the deduction is Rs. 40,000 and the income under the head is nil rather than a negative figure. This matters for a part-year employment, a pension that commences in March, and a family pensioner who also holds a small compassionate appointment.

It follows the regime, not the person’s status. A re-employed pensioner drawing both a pension and a fresh salary aggregates the two under the head Salaries and takes one deduction of Rs. 75,000 against the total. Rule 52(2) of the CCS (Pension) Rules, 2021 separately bars dearness relief on the pension for the period of re-employment, so the pension component itself does not grow during that period, but that is a pension rule and has no bearing on the deduction.

Family pension and the Section 93(1)(d) deduction

A family pension does not get the standard deduction, and instead draws one-third of the pension or Rs. 25,000, whichever is less, in the new regime. The reason is the head of income. Section 93(1)(d) of the Income-tax Act, 2025 defines a family pension as a regular monthly amount payable by an employer to a family member of an employee upon the death of that employee, and charges it under income from other sources. Section 19 reaches only income chargeable under the head Salaries, so it cannot apply.

The deduction under Section 93(1)(d) is the lower of two figures, computed clause by clause: one-third of the family pension or Rs. 25,000 where income-tax is computed under Section 202(1), and one-third or Rs. 15,000 in any other case. On any family pension above Rs. 75,000 a year the monetary ceiling binds rather than the fraction, which is nearly every central government family pension. A family pensioner drawing Rs. 3,00,000 a year therefore gets Rs. 25,000 in the new regime, not the Rs. 1,00,000 that one-third would give.

Two further points sit with this. Where several years of family pension arrears are paid in one instalment, Section 157(1)(d) expressly names arrears of family pension as defined in Section 93(1)(d) as a receipt qualifying for relief, so the family pensioner has the same remedy as a salaried employee under Section 89 relief in its renumbered form. And the family pension of a member of the armed forces where the death occurred in operational duty is exempt outright under serial number 16 of the Table in Schedule III, in which case no deduction question arises. The family pension calculator computes the pension itself; the income tax calculator applies the correct deduction for salary, pension or family pension.

The Rs. 12.75 lakh tax-free ceiling

The Rs. 12.75 lakh figure quoted for a salaried taxpayer is the Rs. 12 lakh rebate threshold plus the Rs. 75,000 standard deduction, and it exists only in the new regime. Section 156(2)(a) of the Income-tax Act, 2025 allows a resident individual whose total income is chargeable under Section 202(1) a deduction from tax of 100% of the income-tax payable or Rs. 60,000, whichever is less, where that total income does not exceed Rs. 12 lakh. A gross salary of Rs. 12,75,000 less the standard deduction is a total income of exactly Rs. 12 lakh, and the rebate then cancels the whole tax on it.

The deduction and the rebate are different instruments at different stages and they stack. The standard deduction reduces the income on which tax is computed; the rebate reduces the tax already computed. Confusing the two is the most common error in the arithmetic, and it usually shows up as an attempt to subtract Rs. 75,000 from the tax rather than from the income.

Just above the threshold, marginal relief takes over. Section 156(2)(b) provides that where total income exceeds Rs. 12 lakh and the tax on it exceeds the amount by which the income exceeds Rs. 12 lakh, the excess of the tax over that amount is allowed as a deduction, so the tax can never exceed the rupee of income above the threshold. Section 156(3) caps the whole relief at the tax payable under the Section 202(1) rates. The old regime has no equivalent: Section 156(1) allows only Rs. 12,500 of rebate and only where total income does not exceed Rs. 5 lakh, so an old-regime salary of Rs. 12,75,000 is squarely taxable after the Rs. 50,000 deduction.

Worked examples

A pensioner with a gross annual pension of Rs. 6,00,000 has a taxable pension of Rs. 5,25,000 in the new regime and Rs. 5,50,000 in the old. The new-regime figure is Rs. 6,00,000 less the Rs. 75,000 standard deduction at Section 19(1) Table serial 2, and the tax on it is nil, because Rs. 5,25,000 is below the Rs. 12 lakh rebate threshold in Section 156(2)(a). The old-regime figure is Rs. 6,00,000 less Rs. 50,000, and it is above the Rs. 5 lakh ceiling in Section 156(1), so the Section 156(1) rebate is not available and tax is payable at the old slabs.

A serving employee at the tax-free ceiling, with a gross salary of Rs. 12,75,000, has a total income of Rs. 12,00,000 in the new regime after the Rs. 75,000 deduction, and pays nil after the rebate. That is the whole arithmetic behind the Rs. 12.75 lakh figure. In the old regime the same salary gives a total income of Rs. 12,25,000, far above the Rs. 5 lakh rebate ceiling, so the old regime is worse for this employee unless the house rent allowance exemption and the Chapter VIII deductions together exceed the gap.

A part-year employee who joins in February and draws Rs. 48,000 of salary for the tax year gets a deduction of Rs. 48,000, not Rs. 75,000, because column C caps it at the salary. The income under the head Salaries is nil and no loss arises to be set off against interest or house property income.

A family pensioner drawing Rs. 3,00,000 a year gets neither figure above. One-third of Rs. 3,00,000 is Rs. 1,00,000, so the monetary ceiling in Section 93(1)(d)(i) binds: the deduction is Rs. 25,000 in the new regime, giving Rs. 2,75,000 chargeable under income from other sources, and Rs. 15,000 in the old regime under Section 93(1)(d)(ii), giving Rs. 2,85,000.

Application in tax deducted at source and on Form 16

The standard deduction is allowed in the monthly deduction of tax at source and is not something claimed for the first time in the return. The Drawing and Disbursing Officer estimates the salary income for the whole tax year, subtracts the Rs. 75,000 or Rs. 50,000 according to the regime the employee is treated as being on, computes the tax on the balance and spreads it across the twelve monthly payments. See TDS on salary and Drawing and Disbursing Officer.

The deduction appears on the Form 16 inside the salary computation in Part B, below gross salary and above the income chargeable under the head. Because the new regime is the default under Section 202(1), the employer applies Rs. 75,000 unless the employee has intimated a choice of the old regime for the year. The option itself is exercised under Section 202(4)(b), by a person with no income from business or profession, along with the return of income furnished under Section 263(1). A salaried taxpayer may therefore switch regime every year, and an intimation to the employer governs only the deduction at source, not the final position in the return.

Where the return claims a different regime from the one the employer used, the deduction figure changes with it and the difference is settled as tax payable or refundable. This is a routine reconciliation and not a defect in the Form 16.

Salary deductions compared

Four reliefs are regularly confused with one another, and the differences are the head of income, the regime and the proof required.

The standard deduction and the family pension deduction are the two that need no documentation and are allowed in both regimes; the professional tax deduction needs a payment record and dies in the new regime; the entertainment allowance deduction no longer exists at all.

How the deduction grew to Rs. 75,000

The standard deduction reached Rs. 75,000 in five steps between 2018 and 2024, and the dates matter because the amount differs in each period, which is what a rectification or a revised return for an earlier year turns on.

• Before the financial year 2018-19 there was no standard deduction; an earlier version had been withdrawn by the Finance Act 2005. Salaried employees instead had a transport allowance exemption of Rs. 19,200 a year and a medical reimbursement exemption of up to Rs. 15,000 a year, both requiring documentation.
• The Finance Act 2018 introduced the standard deduction at Rs. 40,000 from the financial year 2018-19, in place of those two exemptions. The net cash gain to a serving employee who had both was therefore only about Rs. 5,800, while pensioners, who had neither, gained the full Rs. 40,000. The separate transport allowance exemption for a specified employee with a disability survived, and was itself raised to Rs. 15,000 a month plus dearness allowance in the eight metros and Rs. 8,000 elsewhere by rule 15 of the Income-tax Rules, 2026 with effect from 1 April 2026; see transport allowance.
• The Finance Act 2019 raised the deduction from Rs. 40,000 to Rs. 50,000 from the financial year 2019-20.
• The Finance Act 2020 created the new regime under Section 115BAC, which as first enacted did not allow the standard deduction at all.
• The Finance Act 2023 extended the Rs. 50,000 deduction to the new regime for the first time and made that regime the default, from the financial year 2023-24.
• The Finance (No. 2) Act 2024 raised the new-regime deduction to Rs. 75,000, left the old regime at Rs. 50,000, and raised the new-regime family pension ceiling from Rs. 15,000 to Rs. 25,000, all from the financial year 2024-25.

The Income-tax Act, 2025 then carried both figures forward without change into serial number 2 of the Section 19(1) Table and into Section 93(1)(d), and the Union Budget 2026 left them alone for the tax year 2026-27.

Common errors

• Citing Section 16(ia) for the tax year 2026-27. That provision belonged to the Income-tax Act, 1961, repealed from 1 April 2026. The correct citation is Section 19(1) Table serial 2 of the Income-tax Act, 2025. The amount is the same, so the arithmetic survives the error, but the authority does not.
• Claiming the entertainment allowance deduction. Section 16(ii) had no counterpart enacted in the 2025 Act, so the Rs. 5,000 relief for government employees is gone from both regimes.
• Treating it as one deduction per employer or per source. It is one deduction per person against total salary income, whether that income comes from two employers in a year or from a pension and a re-employment salary together.
• Confusing it with the Section 156 rebate. The deduction reduces income before tax is computed; the rebate cancels the tax on income up to Rs. 12 lakh. They operate at different stages and they stack, which is what produces Rs. 12.75 lakh.
• Applying the salary deduction to a family pension. A family pension gets Section 93(1)(d), which is Rs. 25,000 in the new regime and Rs. 15,000 in the old, or one-third of the pension if that is less.
• Using the wrong regime amount. Rs. 75,000 belongs to Section 202(1) computations only; an old-regime return opted into under Section 202(4) carries Rs. 50,000.
• Assuming the new regime allows no deductions at all. The standard deduction and the employer’s contribution to the National Pension System are the notable survivors; see deductions allowed in the new tax regime.

Related Articles

• Rebate, deduction, and exemption: the difference
• Income-tax Act 2025
• The tax year replaces the previous year and assessment year
• Income tax slabs for AY 2027-28
• Deductions allowed in the new tax regime
• New tax regime
• Old tax regime
• Old vs new tax regime
• Marginal relief in income tax
• Section 87A rebate
• Section 89 relief
• NPS tax benefits
• TDS on salary (Section 192)
• Advance tax
• Form 16
• Drawing and Disbursing Officer
• Professional tax
• Entertainment allowance
• Income tax for government employees
• Income tax for pensioners
• Family pension
• Central government pension
• Pension calculation
• Commutation of pension
• Re-employment after retirement
• Leave encashment
• Gratuity for central government employees
• National Pension System
• Transport allowance
• House-rent allowance
• Dearness allowance
• Central Board of Direct Taxes
• Take-home salary for central government employees
• Central government employees in India
• Income tax calculator
• HRA exemption calculator
• Family pension calculator
• 7th CPC salary calculator

External references

• Income-tax Act, 2025 (Act No. 30 of 2025), Gazette of India
• Income Tax Department, e-filing portal
• Central Board of Direct Taxes
• Ministry of Finance, Department of Revenue
• Press Information Bureau
• The Gazette of India

References

1. Income-tax Act, 2025 (Act No. 30 of 2025), assented 21 August 2025 and in force from 1 April 2026, repealing the Income-tax Act, 1961; Section 19(1) Table serial number 2, standard deduction of Rs. 75,000 or the salary whichever is less where income-tax is computed under Section 202(1), and Rs. 50,000 or the salary whichever is less in any other case.
2. Income-tax Act, 2025, Section 19(1) Table serial number 1, deduction for tax on employment levied under article 276(2) of the Constitution, read with Section 202(2)(a)(iv), which excludes it from the new regime computation.
3. Income-tax Act, 2025, Section 93(1)(d), deduction from family pension of one-third or Rs. 25,000 whichever is less under Section 202(1), and one-third or Rs. 15,000 whichever is less in any other case.
4. Income-tax Act, 2025, Sections 15(2) and 16(b), charging pension under the head Salaries by treating a former employer as an employer.
5. Income-tax Act, 2025, Section 156(2), rebate of the whole tax payable up to Rs. 60,000 where total income under Section 202(1) does not exceed Rs. 12 lakh, with marginal relief in Section 156(2)(b), and Section 156(1), the Rs. 12,500 old-regime rebate up to Rs. 5 lakh.
6. Income-tax Act, 2025, Section 202(1) rate table and Section 202(4)(b), under which a person with no income from business or profession exercises the option out of the default regime along with the return furnished under Section 263(1).
7. Income-tax Act, 2025, Section 157(1)(d), relief on arrears, naming arrears of family pension as defined in Section 93(1)(d).
8. Income-tax Act, 1961 (repealed), Section 16(ia) standard deduction, Section 16(ii) entertainment allowance deduction and Section 16(iii) professional tax deduction; Section 57(iia) family pension deduction.
9. Finance Act, 2018, introducing the standard deduction at Rs. 40,000 from the financial year 2018-19 in place of the transport allowance and medical reimbursement exemptions.
10. Finance Act, 2019, raising the standard deduction to Rs. 50,000; Finance Act, 2023, extending it to the new regime and making that regime the default; Finance (No. 2) Act, 2024, raising the new-regime deduction to Rs. 75,000 and the new-regime family pension deduction to Rs. 25,000 from the financial year 2024-25.