What is Standard Deduction in Income Tax?

The standard deduction in income tax is a fixed amount that salaried individuals and pensioners can claim to reduce their taxable income, without having to list out expenses or submit proof of investment. It provides a significant financial benefit for taxpayers by default under the Income Tax Act. The standard deduction amount for the FY 2024-25 (AY 2025-26) is Rs. 50,000 under the old tax regime and Rs. 75,000 under the new tax regime for salaried individuals in India. Reintroduced in the 2018 budget announcement, this provision allows taxpayers to claim a deduction without incurring any actual spending. In this article, we'll provide you with a detailed answer to the question: What is standard deduction in income tax?.

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What is Standard Deduction?

Standard deduction is a fixed amount subtracted from a taxpayer’s gross salary or pension income to arrive at the taxable income, as permitted under the Income Tax Act. In the context of Income tax in India, the standard deduction was reintroduced in 2018 to simplify tax calculations for salaried individuals and pensioners. As of 2024, the standard deduction is ₹50,000 under the old tax regime and has been increased to ₹75,000 under the new tax regime, providing significant tax relief by reducing overall tax liability. This measure not only streamlines the tax filing process but also reduces administrative burdens for both taxpayers and employers.

Benefits of Standard Deduction in Income Tax

The standard deduction offers several significant benefits for salaried individuals and pensioners under the Indian income tax system:

• Flat Reduction of Taxable Income: The standard deduction is a fixed amount subtracted from a person's gross salary or pension, immediately reducing taxable income and, consequently, the overall tax liability.
• Simplification of Tax Filing: Unlike other deductions that require documentation of specific expenses, such as medical or travel bills, the standard deduction can be claimed without any proof or receipts.
• Unconditional Eligibility: All salaried individuals and pensioners are automatically eligible for the standard deduction, regardless of their income level or the nature of their expenses. There are no special conditions or application processes, making it a universally accessible benefit.
• Consistent and Reliable Tax Relief: The deduction is a fixed amount, providing predictable and consistent tax relief each year. This enables better financial planning and ensures that taxpayers can be sure about a certain amount of reduction.

Standard Deduction under the Old Tax Regime

Under the old tax regime in India, salaried individuals and pensioners are eligible for a standard deduction of ₹50,000 from their gross salary or pension income. This deduction is a flat, automatic reduction that does not require any documentation or proof of expenses, directly lowering the taxable income and, consequently, the tax liability. The standard deduction was reintroduced in 2018 and has remained at ₹50,000 since then, serving as a straightforward tax relief mechanism for eligible taxpayers

Example of Standard Deduction under the Old Tax Regime

Here is the example portraying the standard deduction under the old tax regime, 

Standard Deduction under the New Tax Regime

The new tax regime, effective from FY 2024-25, offers a higher standard deduction of ₹75,000 for salaried individuals and pensioners. This deduction is the only major relief available, as most other exemptions and deductions are not permitted under the new regime. The increased standard deduction aims to make the new regime more attractive and simplify the tax filing process by providing a flat reduction in taxable income for all eligible taxpayers.

Example of Standard Deduction under the New Tax Regime

In the below table, we have illustrated the how standard deduction works in the new tax regime.

Learn more: Old vs New Tax Regime: Which is Better for You?

Documents Required for Standard Deduction in Income Tax

As mentioned, one of the key advantages of the standard deduction is that no supporting documents are required specifically to claim it for salary income. However, while filing your income tax return (ITR), you may still need to provide certain documents to complete the process:

• Bank statements for the relevant financial year
• Income statements from interest earned or fixed deposits
• TDS certificates (Form 16 or Form 16A)
• Investment documents for other deductions, if applicable
• Form 26as and Annual Information Statement (AIS) for tax summary and verification

Conclusion

The standard deduction in income tax serves as a valuable benefit for salaried individuals and pensioners in India by offering a fixed, no-strings-attached reduction in taxable income. With ₹50,000 available under the old tax regime and ₹75,000 under the new tax regime from FY 2024-25, it simplifies tax calculations, reduces the need for documentation, and provides consistent financial relief. This automatic deduction enhances tax efficiency and makes income tax filing smoother and more accessible for eligible taxpayers.

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FAQs on Standard Deduction in Income Tax

1. What is standard deduction in income tax?

 Standard deduction is a fixed amount deducted from the gross salary or pension income of a taxpayer to reduce their taxable income, without the need for investment proof or documentation.

2. How much is the standard deduction in FY 2024-25?

For FY 2024-25 (AY 2025-26), the standard deduction is ₹50,000 under the old tax regime and ₹75,000 under the new tax regime for salaried individuals and pensioners.

3. Who is eligible to claim the standard deduction?

All salaried individuals and pensioners are eligible to claim the standard deduction without any specific conditions or spending requirements.

4. Do I need to submit any documents to claim the standard deduction?

No, you do not need to submit any supporting documents to claim the standard deduction. However, general documents like Form 16, bank statements, and Form 26AS are needed for ITR filing.

5. Can I claim the standard deduction under both old and new tax regimes?

Yes, standard deduction is available under both tax regimes—₹50,000 under the old regime and ₹75,000 under the new regime (as applicable from FY 2024-25).

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