Salaried? Know Your Standard Deduction for ITR 2025 and Beyond
The revised Income Tax Bill, 2025, has introduced significant clarifications for salaried individuals, particularly concerning the standard deduction. These changes will be effective from the financial year 2025-26, impacting the Income Tax Return (ITR) you will file in 2026.
According to the new law, the standard deduction for salaried individuals under the new tax regime has been increased, providing a major tax benefit.
What is the Standard Deduction?
The standard deduction is a fixed amount that is automatically subtracted from your salary or pension income to calculate your taxable income. This deduction simplifies the tax filing process and provides tax relief without requiring you to submit proof of expenses. It is available to all salaried employees and pensioners.
Standard Deduction You Can Claim in ITR 2025 (FY 2025-26)
For the financial year 2025-26 (Assessment Year 2026-27), the standard deduction amount you can claim depends on the tax regime you choose:
- New Tax Regime: The standard deduction has been increased from ₹50,000 to ₹75,000.
- Old Tax Regime: The standard deduction remains at ₹50,000.
Old vs. New Tax Regime: Key Differences
The primary differences between the old and new tax regimes lie in their tax rates and the deductions they permit.
| Feature | Old Tax Regime | New Tax Regime |
| Standard Deduction | ₹50,000 | ₹75,000 |
| Tax Rates | Generally higher, with various tax slabs. | Simplified with lower tax rates. |
| Deductions & Exemptions | Allows numerous exemptions (e.g., HRA, LTA) and deductions (e.g., Section 80C, 80D, home loan interest). This is beneficial for those who utilize these perks. | Excludes most common deductions to simplify filing. The higher standard deduction and lower tax rates are key benefits. |
| Tax Rebate (u/s 87A) | Available for income up to ₹5 lakh. | Available for income up to ₹12 lakh. |
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Under the new tax regime, the enhanced standard deduction and a tax rebate for incomes up to ₹12 lakh can result in a tax-free income of up to ₹12.75 lakh for salaried individuals. This makes the new regime an attractive option for many taxpayers who do not rely heavily on the deductions available in the old regime.