What Is the New Standard Deduction in the Income Tax Regime?
What Is the New Standard Deduction in the Income Tax Regime?
Updated for FY 2025–26 & AY 2026–27 under the New Tax Bill 2025
With the introduction of the New Tax Bill, 2025, the Indian government has proposed several taxpayer-friendly changes, one of the most notable being an increase in the standard deduction under the default tax regime.
In this article, we break down what the new standard deduction is, who can claim it, how it compares to the old system, and its impact on your tax savings starting FY 2025–26.
📘 What Is Standard Deduction?
The standard deduction is a flat deduction allowed from your salary or pension income, without the need to submit any bills or proof. It directly reduces your taxable income, which means lower tax liability.
It was first introduced in 2018 to replace transport and medical allowances and has since become a key component of salaried taxpayers’ benefits.
🧾 What Is the New Standard Deduction Under the New Tax Regime?
As per the Income Tax Bill, 2025, applicable from FY 2025–26 (AY 2026–27):
| Regime | Standard Deduction |
| Old Tax Regime | ₹50,000 |
| New Tax Regime (default)✅ | ₹75,000 ✅ |
This is a 50% increase from the previous ₹50,000 and is now available by default under the new regime for:
• Salaried individuals
• Pensioners (including family pensioners, where applicable)
💡 Who Can Claim the Standard Deduction?
You are eligible if you:
• Earn salary income from an employer
• Receive a pension from a previous employer
• Have opted for either the new or old tax regime (depending on the year)
Under the updated law:
• The deduction of ₹75,000 is available even if you have no other deductions under 80C or 80D
• It applies to all income levels
🔍 Why Is This Important?
In the previous years, many taxpayers avoided the new tax regime because it disallowed major deductions like:
• 80C (investments)
• 80D (health insurance)
• HRA and LTA
However, with the enhanced standard deduction of ₹75,000, the new regime becomes more attractive for:
• Salaried individuals with limited investments
• Pensioners who want a hassle-free tax filing process
📊 Example: Tax Benefit Comparison
Mr. Arjun, aged 35, earns ₹10,00,000 annually and doesn’t invest in 80C instruments.
| Particulars | Old Regime | New Regime (FY 2025–26) |
| Gross Salary | ₹10,00,000 | ₹10,00,000 |
| Standard Deduction | ₹50,000 | ₹75,000 |
| Taxable Income | ₹9,50,000 | ₹9,25,000 |
| Tax Payable (approx.) | ₹95,000 | ₹87,500 |
👉 Result: Mr. Arjun saves ₹7,500 more in taxes just by opting for the new regime with the increased standard deduction.
⚠️ Important Points to Note
• You don’t need to submit any documents or bills to claim the standard deduction
• It is automatically considered while computing the tax payable
• It applies to only one employer at a time (in case of multiple jobs)
Final Words
The new standard deduction of ₹75,000 under the default tax regime, effective from FY 2025–26, is a welcome move. It simplifies tax computation, increases net savings for salaried individuals and pensioners, and makes the new regime more appealing even without traditional deductions.
