About Standard Deduction: Old Regime vs New Regime

Last updated: Sept 2026

Standard deduction is one of the few tax benefits available under both regimes, though at different amounts, which makes it worth understanding regardless of which regime you eventually choose.

• Old regime amount: Rs. 50,000, unchanged since FY 2019-20
• New regime amount: Rs. 75,000, effective FY 2024-25 onward
• Eligibility: salaried employees and pensioners only, not self-employed individuals or those with only business income
• No documentation required: applied automatically to eligible income, unlike deductions requiring receipts

• Introduced in its current form in FY 2018-19, at Rs. 40,000, replacing separate transport and medical allowances

  
  

Standard deduction applies automatically if your income qualifies. There is nothing to claim or submit separately.

It was reintroduced in FY 2018-19 to simplify compliance for salaried employees, replacing a more complex set of separate allowances with one flat figure. The new regime's higher Rs. 75,000 amount, against the old regime's Rs. 50,000, is a deliberate policy design, intended to offset the loss of other deductions for salaried taxpayers with few remaining claims.

The amount you receive depends entirely on which regime you choose for the year, not on your income level or employer. The realistic comparison points for a salaried taxpayer are:

• Under the new regime, the amount is higher, but most other deductions (Section 80C, HRA, home loan interest) are unavailable
• Under the old regime, it is lower, but a wider range of deductions remain available if you have investments, rent, or a home loan

• The right regime depends on your total eligible deductions under the old regime, compared against the new regime's higher flat amount and lower slab rates

  
  

This single figure rarely decides which regime suits you on its own. It is one input into a larger comparison.

Eligibility depends on income type, not income level, employer type, or employment tenure.

Pension is treated as salary income for this purpose, so pensioners receive the same amount as salaried employees. Freelancers and business owners can instead deduct actual, documented business expenses against their income, which serves a related but different purpose.

Four steps place standard deduction correctly in the overall calculation sequence.

1. Start with your gross salary or pension income for the financial year.
2. Subtract the applicable amount: Rs. 50,000 under the old regime, or Rs. 75,000 under the new regime.
3. Continue with any other eligible deductions (old regime only) to arrive at net taxable income.

4. Apply the relevant tax slabs to the resulting figure.

   
   

This deduction is subtracted before any other deduction in the sequence, which is why it lowers your net taxable income regardless of what other benefits you do or do not claim.

Consider Ashwin, a 34-year-old bank employee in Chennai with a gross salary of Rs. 11 lakh a year and a CIBIL Score of 752, comparing his net taxable income under each regime.

Formula used: Net taxable income = Gross salary − Standard deduction amount − Other eligible deductions (old regime only)

Despite the new regime's higher amount, Ashwin's net taxable income is lower under the old regime, because his Rs. 2.5 lakh in other deductions outweighs the Rs. 25,000 gap between the two figures.

If a home loan's interest deduction under Section 24(b) is part of your regime decision, factor it in alongside standard deduction before choosing. Approval timelines can extend where self-employed applicants' income documentation needs cross-verification, and minimum income thresholds for salaried applicants can differ by city. Check your home loan eligibility once your regime choice and net income are confirmed.