Standard Deduction for Salaried Taxpayers, AY 2026-27: Rs 50,000 in the Old Regime, Rs 75,000 in the New Regime

For salaried taxpayers filing for Assessment Year 2026-27 (Financial Year 2025-26), the standard deduction under Section 16(ia) of the Income-tax Act, 1961 is the most automatic relief on the return. You submit no bill, no rent receipt and no investment proof to claim it. It is subtracted from your gross salary before a single rupee of tax is computed. The amount, however, is not one figure: for AY 2026-27 it is Rs 50,000 in the old regime and Rs 75,000 in the new regime under Section 115BAC.

That Rs 25,000 gap is recent. Until Finance Act 2024 amended Section 16(ia), the standard deduction was a flat Rs 50,000 in both regimes. From AY 2025-26 onward, a salaried person on the default new regime receives Rs 75,000, a point the Income Tax Department confirms in its New Tax Regime vs Old Tax Regime FAQs. Anyone still repeating "Rs 50,000 in both regimes" is quoting pre-2024 guidance, so check the regime before you fix the figure.

This morning's tip explains precisely what Section 16(ia) grants for AY 2026-27, works through a Rs 16,00,000 salary in both regimes, and lists the errors that surface most often when the Centralised Processing Centre (CPC) runs a Section 143(1) check. To model your own numbers, keep the old vs new regime calculator open alongside this article.

What the Section Says

Section 16(ia) allows a deduction from income chargeable under the head Salaries of "fifty thousand rupees or the amount of the salary, whichever is less" in the old regime, raised to seventy-five thousand rupees for taxpayers on the new regime under Section 115BAC. The full statutory text sits in Section 16 of the Income-tax Act, 1961 on India Code.

The "whichever is less" clause matters at low salaries. A person whose total salary for FY 2025-26 is only Rs 40,000 deducts Rs 40,000, not the full Rs 50,000 or Rs 75,000 — the deduction can never exceed the salary itself. For anyone earning above Rs 75,000 of salary, the cap simply equals the regime figure.

Three features make Section 16(ia) unusually clean. First, it is a flat amount, not a percentage, so it does not scale with salary above the cap. Second, it needs no documentation, unlike House Rent Allowance under Section 10(13A) or the Rs 1,50,000 ceiling under Section 80C. Third, it survives the new regime: Section 115BAC switches off most Chapter VI-A deductions, but the standard deduction is one of the handful it keeps, which is why the new-regime figure was actually increased to Rs 75,000 rather than removed.

Eligibility follows the head of income, not the employment type. Any income taxed as "Salaries" qualifies — full-time employees, contractual staff drawing a salary, and pensioners receiving pension from a former employer, since such pension is itself taxed under the head Salaries. Confirm the figure your employer has applied by reading the deduction line in your Form 16 before you file.

Worked Example

Consider Priya, a salaried professional with a gross salary of Rs 16,00,000 for FY 2025-26 and no other deductions. The table below computes her tax in both regimes for AY 2026-27, applying the standard deduction first and then the slab rates plus 4% health and education cess.

In the new regime, the standard deduction reduces taxable salary to Rs 15,25,000, and the FY 2025-26 slabs (5% from Rs 4,00,000, 10% from Rs 8,00,000, 15% from Rs 12,00,000) produce base tax of Rs 1,08,750. In the old regime the smaller Rs 50,000 deduction leaves Rs 15,50,000 taxable, and the steeper old slabs (20% from Rs 5,00,000, 30% above Rs 10,00,000) produce Rs 2,77,500 before cess. The extra Rs 25,000 of deduction in the new regime saves tax at her 15% marginal rate, worth Rs 3,750 plus cess on the deduction difference alone. Run your own figures through the new regime income-tax calculator.

The deduction is even more powerful near the rebate threshold. Take Rahul, whose gross salary is Rs 12,75,000. In the new regime, the Rs 75,000 standard deduction cuts his taxable income to exactly Rs 12,00,000 — the ceiling for the Section 87A rebate, which is Rs 60,000 for AY 2026-27. His base tax of Rs 60,000 is fully wiped out by the rebate, leaving zero tax. Had the deduction still been Rs 50,000, his taxable income would have been Rs 12,25,000, above the rebate ceiling, and tax would have been payable. The standard deduction here is the difference between a nil liability and a five-figure bill.

Common Mistakes

The standard deduction looks simple, yet it produces a steady stream of Section 143(1)(a) adjustments at CPC. These are the recurring errors.

Claiming it without salary income. Section 16(ia) is confined to the head Salaries. Taxpayers with only business, professional, rental or capital-gains income sometimes enter Rs 50,000 or Rs 75,000 anyway, and the prima-facie adjustment removes it automatically. If you receive an intimation under Section 143(1)(a), this is one of the most common triggers.

Using the wrong regime figure. Claiming Rs 75,000 while filing in the old regime is an over-claim of Rs 25,000 that CPC will reverse, adding tax and interest under Section 234B. The mirror error is quieter but costlier in total: claiming only Rs 50,000 in the new regime, under-claiming by Rs 25,000 and paying more tax than the law requires.

Double-claiming after a job switch. If you changed employers during FY 2025-26, each Form 16 may show the deduction, but it is once per person per year, capped at Rs 75,000 (new) or Rs 50,000 (old) across all employers combined. Adding the two figures together inflates the deduction and invites a 143(1)(a) reversal.

Confusing salary standard deduction with family-pension relief. The Section 16(ia) deduction is for salary and employer pension. Family pension, taxed under Income from Other Sources, carries a separate deduction under Section 57(iia) — do not claim the salary figure against it.

Forgetting it is already pre-filled. Because employers apply it in Form 16 and the ITR utility pre-fills it, manually adding it a second time double-counts. Always reconcile the pre-filled deduction against your gross total income before submitting. When in doubt, cross-check the headline numbers in the income-tax calculator.

FAQ

Is the standard deduction Rs 50,000 or Rs 75,000 for AY 2026-27?

Both figures are correct, depending on your regime. For AY 2026-27 (FY 2025-26) the Section 16(ia) standard deduction is Rs 50,000 in the old regime and Rs 75,000 in the new regime under Section 115BAC. The higher Rs 75,000 figure took effect from AY 2025-26 after Finance Act 2024.

Can I claim the standard deduction in the new tax regime?

Yes. The standard deduction is one of the very few benefits Section 115BAC does not switch off. In the new regime for AY 2026-27 you receive Rs 75,000, which is Rs 25,000 more than the Rs 50,000 available in the old regime.

Do I need to submit any proof or bills to claim it?

No. Unlike HRA under Section 10(13A) or the Rs 1,50,000 ceiling under Section 80C, the standard deduction needs no receipts and no investment proof. Your employer applies it automatically in Form 16, and it is pre-filled in your ITR as a flat Rs 50,000 or Rs 75,000 depending on regime.

I changed jobs during FY 2025-26 — can each employer give me the deduction?

Each employer may apply it in their own Form 16, but the deduction is once per person per year. When you consolidate both salaries in your ITR, your total standard deduction is capped at Rs 75,000 (new regime) or Rs 50,000 (old regime), not doubled. Claiming it twice triggers a Section 143(1)(a) adjustment.

Are pensioners eligible for the standard deduction?

Yes. Pension from a former employer is taxable under the head Salaries, so pensioners claim the same Section 16(ia) deduction — Rs 50,000 (old) or Rs 75,000 (new) for AY 2026-27. Family pension, taxed under Income from Other Sources, instead carries a separate deduction under Section 57(iia).

Does the standard deduction apply to freelance, business or rental income?

No. Section 16(ia) applies only to income chargeable under the head Salaries. If your only income is business, professional, capital gains or house property, you cannot claim the Rs 50,000 or Rs 75,000 standard deduction. Entering it without any salary income is a common CPC rejection under Section 143(1)(a).

Which regime gives me the bigger standard deduction overall?

The new regime, on the standard deduction alone, by Rs 25,000 (Rs 75,000 versus Rs 50,000) for AY 2026-27. But the old regime may still win overall if your HRA, Section 80C, Section 80D and home-loan interest deductions together exceed the new regime's lower slabs — compare the full position in the old vs new regime calculator before locking your choice.