ITR Filing: Standard Deduction And Why It Matters To Taxpayers—Explained
It applies regardless of actual expenses, which means you don’t need to submit any documents to claim it.
In Budget 2025, Finance Minister Nirmala Sitharaman continued the standard deduction benefit for salaried individuals and pensioners under both the old and new tax regimes.
This fixed deduction helps lower your taxable income without the need to submit any bills or proofs, making tax filing simpler and more beneficial, especially for middle-class taxpayers.
What Is Standard Deduction?
The standard deduction is a flat amount that can be deducted from the total income of the salaried individuals in a financial year, while computing the taxable amount.
It applies regardless of actual expenses, which means you don’t need to submit any documents to claim it. As the name suggests, standard deduction is applicable to all salaried taxpayers and pensioners to claim benefits over a pre-defined amount.
Standard Deduction For FY 2024-25
For the financial year 2024–25 (Assessment Year 2025–26), the standard deduction is available under both tax regimes for salaried taxpayers:
· Old Tax Regime: Rs 50,000
· New Tax Regime: Rs 75,000
The standard deduction of Rs 75,000 under the new regime was one of the key highlights of the Budget 2024-25. In the subsequent Budget, on Feb. 1, 2025, the FM announced no income tax on earnings up to an income of Rs 12 lakh. It effectively raised the tax-free income limit for salaried individuals to Rs 12.75 lakh.
Why It Matters
· Bigger Savings For Taxpayers: A higher standard deduction means more income remains tax-free. For those in higher tax slabs, the benefit translates into even more savings.
· No Documentation Needed: Unlike deductions under Section 80C or HRA, the standard deduction is automatic. There’s no need for bills, rent receipts, or investment proofs.
· Simplifies Tax Filing: It cuts down on paperwork and confusion, especially for salaried individuals who don’t claim many other exemptions.
· Helps Pensioners Too: The benefit is also available to retired individuals drawing pensions, making it a valuable relief for senior citizens.
The standard deduction was reintroduced in Budget 2018 at Rs 40,000 by then Finance Minister Arun Jaitley, replacing transport and medical reimbursements. It was later increased to Rs 50,000 in 2019. The new tax regime initially did not offer this deduction, it was only available under the old tax regime. But in FY 2023–24, the standard deduction of Rs 50,000 was also allowed to the salaried taxpayers opting for the new regime. The limit has now been increased to Rs 75,000.
Only salaried employees and family pensioners are eligible for the standard deduction. It is not available to self-employed individuals or members of Hindu Undivided Families (HUFs). The family pensioners can avail the benefits of up to Rs 25,000 in a financial year under the new regime, which was capped at Rs 15,000 earlier.
