Rs 75,000 standard deduction in new regime FY 2025-26: who gets it, family pension corollary, and the salary anchor

If your CTC letter says Rs 13 lakh, the new regime can still hand you a zero-tax outcome for FY 2025-26 - because the Rs 75,000 standard deduction under Section 16(ia) of the Income-tax Act 1961 drops your taxable salary to Rs 12.25 lakh, well inside the Rs 12 lakh rebate threshold built into Section 87A. That single flat number, raised from Rs 50,000 by the Finance (No.2) Act 2024 with effect from FY 2024-25, is the most powerful one-line deduction in the salaried code today, yet it is routinely misclaimed by freelancers, retired pensioners, and HR teams that still print Rs 50,000 on offer letters.

The deduction is sectoral - it lives in the salary head alone. It is not a rebate, not an exemption, and not a function of bills or proofs. It applies the moment your employer files Form 16 with a salary head entry, and the moment you tick "income from salary" in your ITR-1 or ITR-2. The catch is that you must actually be classed as salaried or as a pensioner drawing a periodic pension - and that classification, not the amount, is where most claims fall apart.

What the Section Says

Section 16 of the Income-tax Act 1961 lists three deductions allowed against the "income from salary" head: clause (ia) for the standard deduction, clause (ii) for entertainment allowance (state government employees only), and clause (iii) for professional tax. The first is the one most filers care about.

Section 16(ia) reads, in operative form, that a deduction shall be allowed of "a sum equal to fifty thousand rupees or the amount of the salary, whichever is less" - with two parallel limits applied through the regime split. For taxpayers electing the default new regime under Section 115BAC, the Finance (No.2) Act 2024 amended the proviso so that the deduction is Rs 75,000 from the assessment year 2025-26 onwards (i.e. FY 2024-25 income and beyond). Old-regime filers continue at Rs 50,000.

This is a flat deduction. There is no proof requirement, no expense linkage, and no relation to the CTC structure. It applies regardless of whether your salary is Rs 3 lakh or Rs 3 crore. The only ceiling is that the deduction cannot exceed the salary itself - so a part-year employee with Rs 40,000 of taxable salary gets Rs 40,000, not Rs 75,000.

A second pocket of relief sits in Section 57(iia), which governs family pension - the periodic payment received by the legal heir of a deceased employee. Family pension is taxed under "income from other sources", so Section 16(ia) does not reach it. Section 57(iia) instead allows a deduction of Rs 25,000 or one-third of the family pension, whichever is lower, for new-regime filers (raised by the Finance (No.2) Act 2024 from the earlier Rs 15,000). Old-regime filers continue with Rs 15,000 or one-third.

The classification rule for who is "salaried" comes from Sections 15 and 17. Section 17 defines salary to include wages, pension, gratuity, fees, commissions, perquisites, and profits in lieu of salary. Pension paid by a former employer (private or under EPS-95) falls inside this head, so a 67-year-old retiree drawing Rs 18,000 a month from EPFO can claim Rs 75,000 even with no salary slip. A consultant who invoices her own GST and files ITR-3 has no salary head - she has no standard deduction.

The new regime slabs under Section 115BAC for FY 2025-26, as legislated by the Finance Act 2025, are: nil up to Rs 4 lakh, 5% from Rs 4-8 lakh, 10% from Rs 8-12 lakh, 15% from Rs 12-16 lakh, 20% from Rs 16-20 lakh, 25% from Rs 20-24 lakh, and 30% above Rs 24 lakh, with 4% cess on top. The interaction with Section 87A - which gives a rebate of up to Rs 60,000 at a total income ceiling of Rs 12 lakh - means the standard deduction shifts the zero-tax salary line to Rs 12.75 lakh of gross salary. Our walk-through of the Section 87A rebate covers the marginal-relief cliff above that.

Worked Example: Riya, Rs 13.75 Lakh CTC, Bengaluru

Riya is a 31-year-old product manager at a Bengaluru SaaS firm. Her FY 2025-26 CTC letter shows Rs 13,75,000: basic Rs 6,87,500, HRA Rs 2,75,000, special allowance Rs 3,00,000, employer PF Rs 82,500, gratuity provision Rs 30,000. She rents a 2BHK at Rs 35,000 a month.

Under Section 17, employer PF and the gratuity provision do not enter the salary head as currently-taxable income - so her gross salary is Rs 6,87,500 + Rs 2,75,000 + Rs 3,00,000 = Rs 12,62,500.

New regime path. HRA exemption under Section 10(13A) is unavailable in the new regime (Section 115BAC(2) disallows it). The only deduction is Section 16(ia) at Rs 75,000. Taxable salary = Rs 11,87,500. Slab tax: Rs 0 on first Rs 4 lakh, Rs 20,000 (5% on next Rs 4 lakh), Rs 38,750 (10% on Rs 3,87,500 inside the Rs 8-12 lakh slab) = Rs 58,750. Section 87A rebate caps at Rs 60,000, so the full Rs 58,750 is wiped. Net tax = Rs 0.

Old regime path. Riya uses HRA. Section 10(13A) read with Rule 2A allows the least of: actual HRA Rs 2,75,000, rent minus 10% of basic = Rs 3,51,250, or 50% of basic for metro = Rs 3,43,750. The least is the full Rs 2,75,000. Add standard deduction Rs 50,000, Section 80C Rs 1,50,000 (EPF + tax-saver FD), Section 80D Rs 25,000.

Even with Riya's rent of Rs 4.2 lakh and her Section 80C corpus filled, the new regime saves her Rs 67,600 a year. Our old-vs-new calculator runs this side-by-side automatically. If your salary includes a perquisite (company car, ESOPs, rent-free housing) the valuation under Rule 3 of the Income-tax Rules 1962 dominates, and our perquisite tax calculator handles those Section 17(2) heads separately.

Common Mistakes the CPC Flags

Claiming standard deduction on freelance income. The most common scrutiny trigger generated by ITR processing. If your TDS sits under Section 194J (professional fees) rather than Section 192 (salary), Section 16(ia) does not apply. The fix is ITR-3 or ITR-4 under the Section 44ADA presumptive scheme (50% deemed expenses on gross receipts up to Rs 75 lakh).

Pensioner claiming family pension under salary. Family pension to the legal heir of a deceased employee is taxed under "other sources" - Section 16(ia) is unavailable on it; Section 57(iia) is the right relief at Rs 25,000 in the new regime. Pensioners drawing their own superannuation pension correctly use Section 16(ia). Our pension glossary entry sets out the distinction.

Mixing regime declarations. Filers who submit an old-regime declaration to their employer but file ITR under the new regime sometimes tick old-regime checkboxes (80C, 80D, HRA). The CPC's prima-facie adjustment under Section 143(1)(a) strips these out, often producing a fresh demand. If a Section 245 set-off notice follows, our Section 245 refund-adjustment walk-through covers the 30-day response.

Stretching the deduction beyond the salary. A part-year employee with Rs 60,000 of salary cannot claim Rs 75,000 - the deduction is capped at the salary itself, so the system limits it to Rs 60,000.

Form 16 Part B double-counting. Your employer pre-applies the standard deduction in Form 16 Part B. If you re-claim it in your ITR computation, you are subtracting it twice. Compare Part B "Section 16(ia)" against your ITR "Standard deduction" line. Our Form 16 glossary entry walks through each Part B head.

Multi-employer compounding. If you change jobs mid-year, both employers pre-apply Rs 75,000. You can only claim it once at the consolidated level. Reconcile against Form 26AS before filing - the CPC catches duplicate claims at processing.

Old-regime electing taxpayer not filing Form 10-IEA. From AY 2024-25 onwards, the new regime is default. Salaried filers opt out via the schedule inside ITR-1/ITR-2; business taxpayers (ITR-3, ITR-4) must file Form 10-IEA before the ITR. Missing the form means your deduction reverts to Rs 75,000 and other old-regime deductions vanish. For scrutiny-stage matters, our faceless assessment rights guide covers Section 144B timelines.

FAQ

Is Rs 75,000 available in both the new and old regimes?

No. Rs 75,000 is the new-regime figure under Section 115BAC, applicable from FY 2024-25 onwards as amended by the Finance (No.2) Act 2024. Old-regime filers continue with Rs 50,000. The deduction must match the regime you actually elect - mixing them is a Section 143(1)(a) red flag.

Can a pensioner claim the standard deduction?

Yes, provided the pension is paid by a former employer and falls under the salary head per Section 17. EPS-95, central and state government, and private corporate pensioners all qualify. Family pensioners (legal heirs) cannot use Section 16(ia) - they get Section 57(iia) at Rs 25,000 new, Rs 15,000 old.

Does freelance or consulting income qualify?

No. Standard deduction is a salary-head deduction. Consulting income is taxed under business/profession (Section 28) or "other sources". Freelancers can use the Section 44ADA presumptive scheme instead, but Section 16(ia) is not available to them.

What is the zero-tax salary threshold under the new regime for FY 2025-26?

Rs 12,75,000 of gross salary, for a salaried filer with no other income. That gives Rs 75,000 of standard deduction, leaving Rs 12 lakh of taxable income - fully wiped by the Rs 60,000 Section 87A rebate. Above this, marginal relief kicks in for a narrow band before slab tax dominates.

How does the standard deduction interact with HRA?

HRA exemption under Section 10(13A) is only available in the old regime - explicitly disallowed in the new regime by Section 115BAC(2). The standard deduction sits separately and is available in both regimes at different amounts.

Do I need to submit any proofs?

No. It is a flat statutory deduction with no proof linkage. Your employer applies it automatically in Form 16 Part B; the ITR system applies it automatically once you enter salary income.

What if I switch jobs mid-year and both employers apply Rs 75,000?

You can only claim Rs 75,000 once at the consolidated level. Use total gross salary from both employers, subtract Rs 75,000 once, and recompute. The CPC will otherwise auto-adjust under Section 143(1)(a). Our income-tax calculator handles the consolidated computation.