What is the Standard Deduction?
Section 19(1), Table serial 2 provides the salary standard deduction without expense receipts. For Tax Year 2026-27 the represented limits are ₹75,000 under the default regime and ₹50,000 under the optional old regime, capped by the eligible salary amount. It reduces taxable salary; it is not cash deducted from payroll.
Who Can Claim Standard Deduction?
The salary deduction can apply to employees and pension treated as salary from a former employer. Family pension is not salary for this purpose; it has a separate deduction under the other-sources provisions and should not be entered as salaried pay in this calculator. Self-employment, business receipts, rent, capital gains and interest do not become eligible salary merely because the taxpayer also files an individual return.
Impact on Tax Liability
A resident employee with ₹12,75,000 gross salary, no other income and a full ₹75,000 standard deduction has ₹12,00,000 total income, so Section 156 can reduce default-slab tax to nil. This is not a universal “₹12.75 lakh CTC is tax-free” rule: CTC is not gross salary, the rebate is resident-only, and special-rate or other income affects total-income eligibility. Tax saved by a deduction must be computed through the actual slabs; multiplying the deduction by 31.2% is only a top-bracket illustration.
History of Standard Deduction in India
• Pre-2005: Standard deduction existed at various limits (up to ₹30,000) • 2005-2018: Abolished, replaced with transport allowance + medical reimbursement • Budget 2018: Reintroduced at ₹40,000 • Budget 2019: Increased to ₹50,000 • Budget 2024: Increased to ₹75,000 under New Regime only • Current (2026-27): ₹75,000 (New Regime), ₹50,000 (Old Regime)
Official References
Source date: 2026-07-28. Confirm later notifications, rules and portal forms before filing or transacting.