Standard Deduction of Rs 75,000 Under the New Tax Regime: What Salaried Employees Get for AY 2026-27

For the assessment year 2026-27, every salaried employee and pensioner who is taxed under the default new tax regime is entitled to a flat standard deduction of up to Rs 75,000 from salary income, against Rs 50,000 in the old regime. This single, no-questions-asked deduction is granted under Section 16(ia) of the Income-tax Act 1961 and was raised to Rs 75,000 for the new regime by the Finance (No. 2) Act 2024 with effect from AY 2025-26. Because the new regime under Section 115BAC(1A) has been the default since AY 2024-25, roughly the majority of salaried filers now claim the higher Rs 75,000 figure by default, yet a surprising number still under-report it on their income tax return. This morning tip walks through exactly what the section grants, a worked example at a real salary level, and the scrutiny mistakes that cost refunds.

What the Section Says

Section 16(ia) of the Income-tax Act 1961 allows a deduction from the head "Salaries" equal to Rs 50,000 or the amount of the salary, whichever is less. The Finance (No. 2) Act 2024 inserted a proviso so that, where income is taxable under the new regime of Section 115BAC(1A), the Rs 50,000 figure is read as Rs 75,000. That amendment took effect from 1 April 2025, meaning it applies from AY 2025-26 onwards, and it continues unchanged for AY 2026-27 (financial year 2025-26). The old regime deduction stays at Rs 50,000.

The word "whichever is less" matters. The deduction cannot exceed your actual salary. A retiree drawing a pension of Rs 60,000 for the year gets a standard deduction of Rs 60,000, not Rs 75,000, because pension is taxed under the head Salaries and the deduction is capped at the salary itself. For anyone earning a salary above Rs 75,000 in the year, the full Rs 75,000 is available in the new regime.

Three features make this deduction unusually taxpayer-friendly. First, it needs no bills, no rent receipts, and no proof of expenditure, unlike a Section 80C investment or an HRA claim. Second, it is available even in the new regime, which strips out most other exemptions. Third, it stacks on top of the raised Section 87A tax rebate: under the Finance Act 2025, the rebate in the new regime is now up to Rs 60,000, wiping out tax entirely for a net taxable income up to Rs 12,00,000. The standard deduction effectively lifts the salary at which you cross into a tax bill.

The deduction is the same whether you are a private-sector employee, a government servant, or a pensioner, and it applies once per person regardless of how many employers you had in the year. It does not double if you changed jobs; the Rs 75,000 ceiling is a per-taxpayer limit, not a per-employer one. Use the new regime tax calculator to see how the deduction lands against the AY 2026-27 slabs before you file.

Worked Example

Take Priya, a salaried professional in Pune with a gross salary of Rs 12,75,000 for financial year 2025-26 (AY 2026-27), taxed under the default new regime. She has no other income.

Her gross salary of Rs 12,75,000 is first reduced by the Section 16(ia) standard deduction of Rs 75,000. That leaves a net taxable income of exactly Rs 12,00,000. Against the new regime slabs for FY 2025-26, the tax computes as follows:

Because the standard deduction pulled Priya's net taxable income down to exactly the Rs 12,00,000 rebate threshold, the full Rs 60,000 rebate under Section 87A extinguishes her Rs 60,000 slab tax, and she pays nothing. Without the Rs 75,000 deduction her taxable income would have been Rs 12,75,000, above the rebate ceiling, and she would have owed slab tax with no rebate. This is the single clearest illustration of why the deduction matters at the margin.

Now take Rohan, whose gross salary is Rs 16,75,000 in the same year. After the Rs 75,000 standard deduction his net taxable income is Rs 16,00,000, well above the rebate threshold, so no rebate applies. His tax is Rs 20,000 (5% band) plus Rs 40,000 (10% band) plus Rs 60,000 (15% on the Rs 4,00,000 from Rs 12,00,000 to Rs 16,00,000), a total of Rs 1,20,000, plus 4% cess of Rs 4,800, giving Rs 1,24,800. Had he forgotten the standard deduction, he would have been taxed on Rs 16,75,000, with that extra Rs 75,000 falling in the 20% band, and paid roughly Rs 15,600 more. Run either figure through the old-versus-new regime comparison to confirm which regime is cheaper for your own numbers.

Common Mistakes

The standard deduction looks automatic, but it is a recurring flag in return processing and scrutiny. These are the errors that surface most often.

Claiming it twice after a job change. If you switched employers during FY 2025-26, each Form 16 may show its own standard deduction. When you consolidate the two Form 16s, the deduction must be claimed once, capped at Rs 75,000 in total, not Rs 75,000 per employer. Double-claiming inflates the deduction and triggers an intimation under Section 143(1). Reconcile your figures against your Form 16 before filing.

Assuming freelancers and consultants get it. The standard deduction is only against the head Salaries. A consultant billing under a professional contract reports income under "Profits and gains of business or profession" and is not entitled to the Section 16(ia) deduction at all. Misclassifying professional receipts as salary to grab the deduction is a common and easily detected error.

Using Rs 50,000 in the new regime, or Rs 75,000 in the old. The two figures are regime-specific. Filers who mechanically carry forward last year's Rs 50,000 into a new regime return under-claim the deduction and pay tax on a slice of income that should have been exempt. The reverse mistake, entering Rs 75,000 while opting for the old regime, over-claims the deduction and invites an adjustment. Confirm which regime your return uses first.

Overlooking it on pension income. Pensioners often assume the deduction is only for working employees. Pension from a former employer is taxed as salary, so a pensioner is entitled to the standard deduction, subject to the "whichever is less" cap where the annual pension is below Rs 75,000.

Forgetting the interaction with the rebate. Filers chasing the Rs 12,00,000 rebate threshold sometimes compute it on gross salary. The Rs 12,00,000 ceiling applies to net taxable income after the standard deduction, which is why a gross salary of up to Rs 12,75,000 can still land at zero tax. Read the limit against your gross total income minus the deduction, not the gross figure itself.

FAQ

Is the standard deduction of Rs 75,000 available in the new tax regime for AY 2026-27?

Yes. Under Section 16(ia), read with the proviso inserted by the Finance (No. 2) Act 2024, salaried employees and pensioners taxed under the new regime of Section 115BAC(1A) get a standard deduction of up to Rs 75,000 for AY 2026-27. The old regime figure remains Rs 50,000.

Do I need to submit any proof to claim the standard deduction?

No. The Section 16(ia) deduction requires no bills, receipts, or declarations. It is a flat statutory amount allowed against salary or pension income, unlike HRA or Section 80C claims that need supporting documents.

I changed jobs during the year. Can I claim Rs 75,000 from each employer?

No. The Rs 75,000 limit is per taxpayer for the year, not per employer. Each Form 16 may show the deduction, but when you file you claim it once, capped at Rs 75,000 in aggregate. Claiming it from both employers leads to an adjustment under Section 143(1).

Can a pensioner claim the standard deduction?

Yes. Pension received from a former employer is taxed under the head Salaries, so a pensioner claims the standard deduction of up to Rs 75,000 in the new regime, limited to the actual pension where it is below that amount.

Does the standard deduction help me reach the Section 87A rebate?

Yes. The Rs 12,00,000 rebate threshold in the new regime applies to net taxable income after the Rs 75,000 standard deduction. A gross salary up to Rs 12,75,000 can therefore be reduced to Rs 12,00,000 and attract the full Rs 60,000 rebate, giving zero tax for FY 2025-26.

Is the standard deduction available to freelancers and self-employed professionals?

No. It is available only against income under the head Salaries. Freelancers and consultants report under business or professional income and cannot claim the Section 16(ia) deduction, though they may deduct actual business expenses instead.

What is the difference between the old and new regime standard deduction amounts?

For AY 2026-27, the new regime allows Rs 75,000 and the old regime allows Rs 50,000, both under Section 16(ia). The higher new-regime figure was introduced by the Finance (No. 2) Act 2024 with effect from AY 2025-26.