₹75,000 standard deduction in new regime FY 2025-26: how s.16(ia) was amended and what it means for salaried employees
The standard deduction is ₹75,000 in the new tax regime and ₹50,000 in the old regime for FY 2025-26 — both under s.16(ia) of the Income-tax Act, 1961. How the split arose, what it saves at each slab, and how Form 16 reflects it.
Harun Raaj
Chartered Accountant · Harun Raaj & Associates
For FY 2025-26 (AY 2026-27), salaried employees and pensioners get a standard deduction of ₹75,000 in the new tax regime and ₹50,000 in the old regime — two different numbers under the same s.16(ia) of the Income-tax Act, 1961. The Finance Act 2024 raised the new-regime figure from ₹50,000 to ₹75,000 with effect from FY 2024-25; the old regime stayed at ₹50,000, and Finance Act 2025 carried both forward unchanged. Treating ₹75,000 as universal, or quoting ₹50,000 for both regimes, is the most common payroll and ITR misquote of the current filing season.
Staleness alert: Many payroll portals and tax blogs still print one standard deduction number for everyone. The correct FY 2025-26 split is ₹75,000 in the new regime (s.16(ia) read with s.115BAC) and ₹50,000 in the old regime. If a source does not split by regime, the number is incomplete — and it will disagree with your Form 16.
Why two numbers exist under one section
Standard deduction is not a Chapter VI-A deduction; it is an adjustment from income under the head "Salaries," set by s.16(ia). The regime split works like this:
The Finance Act 2024 raised the new-regime amount from ₹50,000 to ₹75,000 w.e.f. FY 2024-25 — the biggest single change that reduced the incentive to stay in the old regime. For FY 2025-26, Finance Act 2025 kept it at ₹75,000. The old-regime ₹50,000 figure has been unchanged since it was introduced (for AY 2019-20 onward).
What changed FY 2025-26: the before/after diff
The ₹25,000 increase (₹50,000 → ₹75,000) applied from FY 2024-25, so FY 2025-26 filers are the second cohort to see it — and many still file with the old number pre-filled.
What the ₹25,000 gap is worth, by slab
The extra ₹25,000 of standard deduction in the new regime reduces taxable income by ₹25,000. Its tax value depends on the marginal slab the income would otherwise hit:
At a ₹10 lakh salary the ₹25,000 gap is worth between ₹2,500 and ₹5,000 — before counting the wider new-regime slabs and the Section 87A rebate, which is why "₹75,000 standard deduction" and "new regime wins" are usually the same story.
Worked example: Amit earns ₹10 lakh
Persona: Amit, salaried resident individual, FY 2025-26, only salary income, no Chapter VI-A claims.
New regime
Old regime (same facts, no 80C/80D/HRA for an apples-to-apples view)
At ₹10 lakh with no deductions, the new regime pays ₹0 and the old regime pays ₹1,06,600. The standard deduction alone does not explain the full gap — wider slabs and the ₹60,000 rebate do — but the ₹75,000 figure is the number that shows up on the employee's payslip and Form 16 first, which is why it carries disproportionate weight in the regime decision.
How Form 16 and employer TDS handle it
- Form 16 Part B lists gross salary and deducts the standard deduction before computing tax. The employer applies the figure that matches the regime used for TDS (Form 24Q).
- The new regime is the default for FY 2025-26. Unless the employee submitted a valid opt-out (and the employer honours it via a declaration), the employer computes TDS with ₹75,000.
- Pensioners get the same split: ₹75,000 in the new regime, ₹50,000 in the old, on pension income taxable under "Salaries." Family pensioners also get the separate ₹25,000 deduction under s.57(iia).
- No bills or proofs. Standard deduction is automatic — unlike HRA, it needs no rent receipts.
- The deduction is applied before slab computation and before the Section 87A rebate. It is not a substitute for HRA (which the new regime disallows under s.10(13A) anyway).
Frequently asked questions
1. Is the standard deduction ₹75,000 for everyone in FY 2025-26?
No. ₹75,000 applies in the new tax regime only. The old regime keeps ₹50,000. Both are under s.16(ia); the regime decides the figure.2. When did the standard deduction go from ₹50,000 to ₹75,000?
FY 2024-25, by the Finance Act 2024, for the new regime only. FY 2025-26 is the second year of the higher figure; it did not change again.3. Can I claim ₹75,000 and still use 80C or HRA?
Not in the new regime. The new regime allows the ₹75,000 standard deduction but disallows most Chapter VI-A deductions (including 80C) and HRA under s.10(13A). The old regime keeps ₹50,000 alongside those deductions.4. My Form 16 shows ₹50,000 — is it wrong?
Not necessarily. If your employer computes TDS under the old regime, ₹50,000 is correct. If you are on the new regime and Form 16 shows ₹50,000, the regime flag is wrong — fix the declaration before filing, because the ITR follows your chosen regime, not the payslip.5. Do pensioners get the standard deduction?
Yes. Pension income taxable under "Salaries" gets the standard deduction — ₹75,000 in the new regime, ₹50,000 in the old. A separate ₹25,000 deduction applies to family pension under s.57(iia).6. Is the standard deduction available if my only income is from other sources?
No. s.16(ia) applies only to income under the head "Salaries." Freelance or interest income does not qualify; the deduction is tied to salary/pension income.---
Last verified: 2026-08-05 (FY 2025-26 / AY 2026-27)
Sources: s.16(ia), Income-tax Act, 1961 (standard deduction, raised to ₹75,000 in the new regime by Finance Act 2024 w.e.f. FY 2024-25; ₹50,000 in the old regime); s.115BAC (new regime); s.57(iia) (family pension ₹25,000, Finance Act 2024); s.87A (rebate); Form 16 / Form 24Q employer TDS mechanics. Worked-example arithmetic reproducible from the figures above. For the full FY 2025-26 rate card, see the FY 2025-26 tax rates master table or book a consultation at harunraaj.com.
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