The Standard Deduction is a fixed amount that salaried individuals and pensioners can subtract from their total income, reducing their taxable income. This deduction simplifies the tax calculation process and provides financial relief without requiring any proof of expenses.
Who Can Claim Standard Deduction?
- Salaried Employees: Individuals earning a salary from an employer, including private and government sector employees.
- Pensioners: Retired individuals receiving a pension from their previous employer.
- Family Pensioners: Individuals receiving a family pension can claim a deduction of ₹15,000 or one-third of the pension amount, whichever is lower.
Note: Self-employed professionals and business owners are not eligible for this deduction.
Standard Deduction Amounts for AY 2025-26
| Tax Regime | Deduction Amount |
|---|---|
| Old Tax Regime | ₹50,000 |
| New Tax Regime | ₹75,000 |
As per the Union Budget 2025, the standard deduction under the new tax regime has been increased to ₹75,000 to provide additional relief to taxpayers.
Benefits of Standard Deduction
- Automatic Application: No need to submit any documents or proofs. The deduction is applied automatically when filing Income Tax Returns.
- Reduces Taxable Income: Directly lowers the amount of income subject to tax, leading to potential tax savings.
- Simplifies Tax Filing: Eliminates the need to track and submit various expense receipts.
Example Calculation
Scenario: A salaried individual with an annual income of ₹10,00,000.
- Old Tax Regime:
- Standard Deduction: ₹50,000
- Taxable Income: ₹10,00,000 – ₹50,000 = ₹9,50,000
- New Tax Regime:
- Standard Deduction: ₹75,000
- Taxable Income: ₹10,00,000 – ₹75,000 = ₹9,25,000
Choosing the appropriate tax regime can lead to significant tax savings.
Key Points to Remember
- The standard deduction is available under both old and new tax regimes.
- It is a flat deduction, irrespective of actual expenses incurred.
- No additional documentation is required to claim this deduction.
- Family pensioners have a separate deduction limit.
Understanding and utilizing the standard deduction effectively can lead to substantial tax savings for salaried individuals and pensioners. It’s essential to evaluate both tax regimes to determine which offers the most benefit based on individual financial situations.
