Standard Deduction

The Standard Deduction is a fixed deduction available to all salaried employees and pensioners under the Income Tax Act, regardless of the actual expenses incurred.

It was reintroduced in the Union Budget 2018-19 at ₹40,000 (later increased to ₹50,000 and then ₹75,000 in subsequent budgets). For FY 2024-25, the standard deduction is ₹75,000 for salaried individuals and pensioners under both the old and new tax regimes. What is the Standard Deduction? It is the simplest deduction to claim — you do not need to submit any bills, investments, or receipts to claim it. It is automatically available to every salaried individual and is subtracted from your gross salary income before calculating taxable income. It effectively increases the tax-free portion of your salary. For example, if your gross salary is ₹12 lakhs per year, the standard deduction of ₹75,000 reduces your taxable salary to ₹11.25 lakhs. In the new tax regime, where there is no 80C/80D exemption option, the standard deduction of ₹75,000 is still available and provides the same benefit. This means the government has effectively increased the tax-free threshold for salaried employees by ₹75,000. The standard deduction covers and replaces the former transport allowance (₹19,200 per year) and medical allowance (₹15,000 per year) that were available separately under the old regime. Since these were combined into the standard deduction, you can no longer claim separate deductions for office travel and medical expenses unless they are covered under other sections like 80D for health insurance. For pensioners, the standard deduction is also ₹75,000 under both tax regimes. If a pensioner receives a pension from a former employer, they are treated as a salaried employee for tax purposes and can claim the standard deduction. Family pension (received by a widow/widower after the death of a pensioner) is treated as income from other sources and does not qualify for the standard deduction, though it does get a deduction of 33.33% of the family pension or ₹15,000, whichever is lower, under Section 57 of the Income Tax Act. The standard deduction is particularly beneficial because it requires zero documentation. Unlike 80C (where you need investment proofs) or HRA (where you need rent receipts), the standard deduction is available by default. Even if you do not submit any investment proofs or rent receipts, you can still claim the standard deduction and reduce your taxable income. This makes it the first and most reliable tax-saving tool available to every salaried person in India, from a ₹3 lakh per year intern to a ₹2 crore per year executive.