The standard deduction is a flat amount that salaried employees and pensioners can subtract from their gross income before computing tax. Unlike itemised deductions such as Section 80C or Section 80D, it requires no investment, no bills and no proof. It is automatically available just because you earn a salary.
Current limits
| Regime | Standard deduction |
|---|---|
| Old tax regime | Rs 50,000 |
| New tax regime (from FY 2024-25) | Rs 75,000 |
The new regime amount was raised from Rs 50,000 to Rs 75,000 in the July 2024 Budget. This makes the new regime marginally more attractive for salaried taxpayers who do not have large Section 80C or 80D deductions.
How it works in practice
Your employer includes the standard deduction when calculating monthly TDS. If your gross salary is Rs 12,00,000 and you opt for the new regime, the employer subtracts Rs 75,000 before applying slab rates, so tax is calculated on Rs 11,25,000 minus any other eligible deductions.
When you file your ITR, the standard deduction is claimed in the income computation itself. There is no separate form or declaration needed.
History and context
Before 2018, salaried employees could claim a transport allowance exemption and a medical reimbursement exemption, both of which required bills and paperwork. The standard deduction replaced those two benefits in Budget 2018 with a single, no-proof amount of Rs 40,000, raised to Rs 50,000 in 2019 and Rs 75,000 under the new regime in 2024.
Who can claim it
- Salaried employees receiving salary income under Section 17(1).
- Pensioners receiving pension, because pension is taxed under the head Salaries.
Self-employed individuals and freelancers cannot claim the standard deduction. They deduct actual business expenses from professional income instead.
Standard deduction and your Form 16
Your Form 16 Part B will show the standard deduction as a line item under Deductions. If you switched employers during the year, each Form 16 may show the deduction separately, but you can claim it only once in your ITR.
Practical tip
If your total deductions under the old regime, including 80C, 80D, HRA, home loan interest and others, exceed the benefit from higher new-regime exemptions, the old regime remains better. If they do not, the new regime's Rs 75,000 standard deduction combined with lower slab rates usually wins. Check both in our Income Tax calculator.