Standard deduction for salaried employees and pensioners
Updated 11 October 2026
The standard deduction is a flat amount subtracted from salary or pension income before tax is worked out, with no bills or proof needed. In tax year 2026-27 it is ₹75,000 in the new regime and ₹50,000 in the old regime. It now sits in section 19 of the Income-tax Act, 2025 (section 16(ia) of the 1961 Act).
How much you can claim
| Regime | Standard deduction | Family pension deduction |
|---|---|---|
| New regime (default) | ₹75,000 | One-third of family pension or ₹25,000, whichever is lower |
| Old regime | ₹50,000 | One-third of family pension or ₹15,000, whichever is lower |
If your salary for the year is less than the deduction, the deduction is limited to the salary. It cannot create a loss.
Who can claim it
- Salaried employees in government, PSUs and private companies, including part-time and contract employees paid as employees (with an employer-employee relationship).
- Pensioners, because pension from a former employer is taxed as salary. This covers central and state government pensioners, as well as private sector pensioners.
- Not family pensioners for the family pension itself. Family pension received after the death of an employee or pensioner is "income from other sources", so instead of the standard deduction there is a separate family pension deduction (table above).
- Not freelancers or consultants who earn professional fees. Their income is business or professional income, where actual expenses or presumptive rates apply instead.
Rules worth knowing
- One deduction per year, not per job. If you changed jobs, you still get ₹75,000 in total. If both employers allowed it in TDS, you will owe some tax when you file, so tell your new employer about your earlier salary.
- Salary and pension in the same year: someone who retires mid-year gets one standard deduction against salary and pension combined.
- No proof is needed. Your employer applies it automatically when working out TDS, and the return form fills it in.
- Old regime only: professional tax. In the old regime, the professional tax you pay to your state (up to ₹2,500 a year) is also deducted from salary, under the same section 19. The new regime does not allow it.
What it is worth to you
With the standard deduction: taxable income = ₹12,75,000 − ₹75,000 = ₹12,00,000. Slab tax = ₹20,000 + ₹40,000 = ₹60,000. Rebate ₹60,000. Tax = nil.
Without it: taxable income ₹12,75,000. Slab tax = ₹60,000 + 15% of ₹75,000 (₹11,250) = ₹71,250. No rebate above ₹12 lakh, and marginal relief does not help because ₹71,250 is less than the ₹75,000 by which income exceeds ₹12 lakh. Tax with 4% cess = ₹74,100.
Here the ₹75,000 deduction saves ₹74,100, because it pulls Meena's income inside the rebate limit.
In the old regime at the 30% slab, the ₹50,000 deduction saves ₹15,000 + 4% cess = ₹15,600.
For government pensioners
Pension and the Dearness Relief paid on it are both taxed as salary, so the standard deduction applies to the total. Many pensioners end up paying no tax at all in the new regime.
The pension disbursing bank allows the standard deduction while working out TDS, so a pensioner below the rebate limit should see no TDS on pension. See pension calculator for the pension amount itself.
How the deduction has changed
The standard deduction came back from 2018-19 at ₹40,000, replacing the separate transport allowance and medical reimbursement exemptions. It rose to ₹50,000 from 2019-20, was extended to the new regime from 2023-24, and was raised to ₹75,000 in the new regime from 2024-25. The old regime figure has stayed at ₹50,000. Budget 2026 made no change.
Related reading
The standard deduction is the first step in calculating tax on salary. Pensioners should also read tax on pension. You can check its effect on your take-home in the salary calculator or see tax on a ₹12.75 lakh salary.