Taxation7 min readUpdated: October 2026
Standard Deduction of ₹75,000: Eligibility, Slabs & Impact on In-Hand Pay
A detailed analysis of the enhanced ₹75,000 standard deduction under Finance Act reforms: who qualifies, how payroll TDS changes, and comparison with the Old Tax Regime.
SG
SalaryGrid Tax Research DeskAuthor
Lead Regulatory & Payroll Analyst • Chartered Payroll Specialist
Peer Reviewed by Chirag Vaja (Founder & Lead Engineer)
Executive Summary & Key Takeaways
- •The Standard Deduction under the New Tax Regime (Section 115BAC) was increased from ₹50,000 to ₹75,000.
- •The Standard Deduction under the Old Tax Regime remains unchanged at ₹50,000.
- •No receipts, rent agreements, or medical bills are required to claim this deduction.
- •Combined with the Section 87A rebate, salaried employees earning up to ₹7,75,000 gross annual pay have zero tax liability.
1. The Evolution of Standard Deduction in India
Standard Deduction was originally reintroduced in the 2018 Union Budget at ₹40,000 to replace fragmented allowances for medical reimbursements and transport. It was subsequently raised to ₹50,000 in 2019.
Under the latest Finance Act amendments, the Central Government instituted a pivotal revision:
- **New Tax Regime (Section 115BAC):** Standard Deduction increased by 50% to **₹75,000**.
- **Old Tax Regime:** Standard Deduction remains frozen at **₹50,000**.
This deliberate ₹25,000 differential was engineered to make the New Tax Regime substantially more rewarding for middle-income salaried employees and pensioners.
2. Who is Eligible to Claim the ₹75,000 Deduction?
Under Section 16(ia) of the Income Tax Act, 1961, eligibility is governed by the following criteria:
### Who Qualifies:
1. **Salaried Employees:** Any individual receiving salary income from an employer (private sector, public sector, central or state government).
2. **Pensioners:** Individuals receiving monthly pension income from a former employer (treated as salary income under Section 17).
3. **Family Pensioners:** Family pensioners receiving pension after an employee's demise receive an enhanced deduction of **₹25,000** (raised from ₹15,000).
### Who Does NOT Qualify:
- **Self-Employed Professionals & Freelancers:** Income taxed under 'Profits and Gains of Business or Profession' (Section 44ADA / Section 44AD) cannot claim standard deduction.
- **Independent Consultants:** Professionals paid on gross invoices with 10% TDS under Section 194J are ineligible.
3. How ₹7,75,000 Gross Salary Becomes 100% Tax-Free
The combination of the ₹75,000 standard deduction and the Section 87A rebate creates a powerful zero-tax threshold for Indian salaried professionals:
```
Gross Annual Salary: ₹7,75,000
Less: Standard Deduction: -₹75,000
-----------------------------------------
Net Taxable Income: ₹7,00,000
-----------------------------------------
Tax Calculation under Slabs:
• Up to ₹3,00,000 @ 0%: ₹0
• ₹3,00,001 to ₹7,00,000 @ 5%: ₹20,000
Total Calculated Tax: ₹20,000
Less: Section 87A Rebate: -₹20,000
-----------------------------------------
Final Net Tax Payable: ₹0
```
Any salaried professional with a gross package of ₹7.75 LPA pays **zero income tax** under the New Tax Regime, retaining 100% of their earnings (subject only to standard EPF and ₹200/month Professional Tax).
4. Exact Tax Savings Across Salary Brackets
How much incremental cash does the extra ₹25,000 standard deduction put in your bank account every year?
| Gross CTC Bracket | Marginal Tax Rate | Annual Direct Tax Saved | Monthly In-Hand Increase |
| :--- | :--- | :--- | :--- |
| **Up to ₹7.75 Lakhs** | 0% (Rebate) | ₹0 (Already Zero) | ₹0 |
| **₹8.0 Lakhs – ₹10.0 Lakhs** | 10% | **₹2,600** (incl. cess) | +₹217 / month |
| **₹10.0 Lakhs – ₹12.0 Lakhs**| 15% | **₹3,900** (incl. cess) | +₹325 / month |
| **₹12.0 Lakhs – ₹15.0 Lakhs**| 20% | **₹5,200** (incl. cess) | +₹433 / month |
| **Above ₹15.0 Lakhs** | 30% | **₹7,800** (incl. cess) | +₹650 / month |
While an extra ₹7,800 per year might seem modest for high earners, its greatest virtue is that it requires **zero investment lock-in, zero insurance policy commitments, and zero documentation headaches**.
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Frequently Asked Questions
Do I need to submit fuel bills or rent slips to claim the ₹75,000 standard deduction?
No. Standard Deduction is a flat statutory allowance provided automatically by payroll software without requiring any receipts, bills, investment declarations, or proofs.
Can I claim standard deduction if I worked for only 6 months in a financial year?
Yes. The standard deduction is not prorated based on months worked. Even if you worked for only part of the financial year, you are entitled to claim the full ₹75,000 deduction against your salary income.