What is Standard Deduction in Income Tax? A Simple Guide for Salaried Individuals in India

Millions of people in India who get a salary often find income tax to be a tricky subject. Although several terms like deductions and exemptions are used, the Standard Deduction is one benefit that makes tax calculation much easier and lessens your tax burden.

If you're a salaried employee or a pensioner, understanding what is standard deduction in income tax is absolutely essential. There is no need to show receipts or bills since you can deduct this amount from your gross salary or pension, whichever you prefer. To me, this sounds like a good plan. Let's dive deeper and simplify this important deduction in income tax from a guide from EximPe.

Understanding the Basics of Standard Deduction in Income Tax

The standard deduction in income tax was reintroduced in the Union Budget 2018, replacing the earlier allowances for transport and medical reimbursement. The primary aim was to simplify the tax filing process for salaried individuals and pensioners, providing them with a straightforward and unconditional deduction in income tax.

Before it was reintroduced, people who worked had to show receipts for any medical and transport costs they had to pay to be able to claim the deduction. The standard deduction makes it easy because you don’t have to give additional papers to claim the money..

The Evolution of Standard Deduction

• The standard deduction was an option in the past, but it was taken away in 2005. During the Financial Year 2018-19 (Assessment Year 2019-20), the Education Cess was reintroduced by setting its amount at ₹40,000. This sum went up to ₹50,000, effective from Financial Year 2019-20 (Assessment Year 2020-21), onwards.
• During Financial Year 2024-25 (Assessment Year 2025-26), the standard deduction has been fixed at:
• Taxpayers could save ₹50,000 under the previous government tax system.
• The New Tax Regime includes everyone with income less than ₹75,000. The increase was brought in Union Budget 2025-26 to help persuade people to use the new tax regime, matching the earnings of salaried workers in housing benefits.

Who is Eligible for Standard Deduction in Income Tax?

The standard deduction in income tax is primarily applicable to:

• Salaried Individuals: Any individual who receives a salary from an employer is eligible.
• Pensioners: Individuals receiving pension income from their former employer can also claim this deduction in income tax.

How Does Standard Deduction Work?

Let’s say your total salary for the financial year is ₹8,00,000. By claiming the standard deduction:

• Taxable salary = ₹8,00,000 – ₹50,000 = ₹7,50,000

This ₹50,000 is a straightforward deduction—you don't need to submit any bills or proof.

Standard Deduction vs Other Tax Deductions

While standard deduction is automatically applied, other deductions under Chapter VI-A (like 80C, 80D, etc.) require eligible expenses or investments. Here’s how they differ:

What is Section 80GGC Deduction in Income Tax?

Section 80GGC allows individuals to claim deductions for donations made to registered political parties or electoral trusts.

Key Points:

• Available only to individual taxpayers (not companies or firms)
• Donation must be made via non-cash mode (cheque, digital, etc.)
• No upper monetary limit, but total income must be taxable
• You’ll see this reflected as a deduction under Chapter VI-A while filing your ITR

80GGC Deduction Income Tax Message:

While filing your return, you may see a message or prompt about 80GGC deduction if such donations have been recorded or expected based on your Form 26AS or self-declaration.

Deductions in Income Tax: A Quick Overview

Here’s a breakdown of common deductions you can claim along with the standard deduction:

Section 80C:

• Life insurance premiums
• ELSS (Equity Linked Savings Scheme)
• Employee Provident Fund (EPF)
• Tuition fees, principal on home loans

Section 80D:

• Medical insurance for self, spouse, children, and parents
• Senior citizen benefits under this section

Section 24(b):

• Interest paid on home loans (up to ₹2 lakh)

Section 80TTA/TTB:

• Interest on savings account or deposits (₹10,000/₹50,000)

How to Claim Standard Deduction While Filing ITR

You don’t need to do anything manually to claim the standard deduction if:

• You choose the old tax regime
• You file using ITR-1 or ITR-2 (for most salaried individuals)

The system will auto-apply ₹50,000 if you meet the criteria.

However, if you opt for the new tax regime, you’ll have to forego this benefit (along with most deductions).

Conclusion

The standard deduction in income tax is one of the simplest and most effective ways for salaried individuals to reduce their taxable income. It happens automatically and does not involve filling out any forms; furthermore, it works hand in hand with other deductions in the old regime. You can save more taxes by finding out how Section 80GGC and similar deductions operate.

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FAQ’s

What is standard deduction in income tax?

The standard deduction in income tax is a fixed amount that salaried individuals and pensioners can deduct from their gross salary or pension income to reduce their taxable income. Taxes were made less complicated when it replaced items like transport and medical reimbursement returns.

What is the current standard deduction amount for FY 2024-25 (AY 2025-26)?

For Financial Year 2024-25 (Assessment Year 2025-26), the standard deduction in income tax is ₹50,000 under the Old Tax Regime and ₹75,000 under the New Tax Regime.

Is standard deduction available under both Old and New Tax Regimes?

Yes, from FY 2024-25 (AY 2025-26) onwards, standard deduction in income tax is available under both the Old Tax Regime (₹50,000) and the New Tax Regime (₹75,000) for salaried individuals and pensioners.

Do I need to submit bills or proofs to claim standard deduction?

No, one of the key benefits of the standard deduction in income tax is that you do not need to submit any bills, receipts, or proofs of expenses to claim this deduction. It's a flat, unconditional deduction in income tax.

What is the difference between standard deduction and other deductions like 80C?

The standard deduction in income tax is a flat deduction from your salary income under Section 16(ia). Other deduction in income tax like 80C, 80D, etc. (Chapter VI-A deductions) are typically for specific investments or expenses. Under the Old Tax Regime, you can claim both standard deduction and Chapter VI-A deduction in income tax. Previously, under Chapter VI-A, a taxpayer could choose between deductions; now, only standard deduction is allowed.

I received an 80GGC deduction income tax message. Is this related to standard deduction?

No, an 80GGC deduction income tax message is not related to the standard deduction in income tax. Section 80GGC is a deduction in income tax for donations made to political parties or electoral trusts. The message comes from the Income Tax Department to check your claims made under Section 80GGC, so you have to show the required paperwork for the gifts.

Can pensioners also claim standard deduction?

Yes, individuals receiving pension income from their former employer are also eligible to claim the standard deduction in income tax on their pension income.

If I change jobs during the financial year, can I claim standard deduction from both employers?

No, the standard deduction in income tax is a fixed amount for the entire financial year, per individual, regardless of the number of employers you have. For the year, you can take advantage of ₹50,000 (Old Regime) or ₹75,000 (New Regime).

How does standard deduction help in reducing tax liability?

The standard deduction in income tax directly reduces your gross salary or pension income, thereby lowering your net taxable income. Paying less tax is possible if your taxable income is lower, because you become eligible for a lower tax bracket or you will pay less tax within your previous bracket.

Where is standard deduction mentioned in my income tax return (ITR) form?

The standard deduction in income tax is typically pre-filled or has a dedicated field under the "Income from Salaries" section of your ITR form, usually referencing Section 16(ia).