The Standard Deduction Under the New Tax Regime, Explained
₹75,000 comes off your salary before a single slab is applied — no investment, no proof, no declaration. It's a small line item with an outsized effect: it's the entire reason ₹12.75L salary, not ₹12L, is the real tax-free number.
Old vs New Tax Regime Calculator
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The short answer
The new regime's standard deduction is ₹75,000 for salary and pension income, for FY 2025-26 (AY 2026-27) — ₹25,000 more than the old regime's ₹50,000. It's applied automatically by your employer; you don't need to claim it.
Who actually gets it
- Salaried employees and pensioners — anyone whose income is taxed under the "Salaries" head. Applies in both regimes, at different amounts.
- Family pensioners get a different, smaller deduction: the lower of one-third of the pension or ₹25,000 (new regime) / ₹15,000 (old regime) — family pension is taxed under "Income from Other Sources", not "Salaries", so it follows its own rule.
- Freelancers, consultants, and business owners do NOT get it — see old vs new regime for freelancers for what that means in practice.
Why ₹12,75,000, not ₹12,00,000, is the real tax-free line
The 87A rebate threshold — the point up to which the new regime charges zero tax — is stated as ₹12,00,000, but that's taxable income, measured after the standard deduction. Work backwards: ₹12,00,000 taxable + ₹75,000 standard deduction = ₹12,75,000 gross salary. That's the actual number that matters if you're checking your own payslip or offer letter against the "tax-free up to ₹12L" headline.
What happens right at the edge
| Gross salary | Taxable income | New regime tax (incl. cess) |
|---|---|---|
| ₹12,75,000 | ₹12,00,000 | ₹0 |
| ₹12,75,100 (₹100 more) | ₹12,00,100 | ≈ ₹104 |
No cliff — crossing the line by ₹100 costs about ₹104 in tax, not a jump to full slab tax. That's marginal relief working exactly as intended; see old vs new regime for salaried income above ₹12 lakh for what happens further past this point.
What the bigger deduction is actually worth in rupees
The new regime's standard deduction isn't just larger in absolute terms — it's worth more in tax terms too, for anyone deep enough into a bracket that the whole deduction sits inside one slab. Take a ₹30,00,000 salary with no other deductions: both regimes' top rates (30%) apply well before this deduction is subtracted, so the entire deduction amount is taxed away at the top marginal rate.
- New regime: ₹75,000 deduction × 30% × 1.04 cess = ₹23,400 saved
- Old regime: ₹50,000 deduction × 30% × 1.04 cess = ₹15,600 saved
The ₹25,000 larger deduction is worth an extra ₹7,800 in the new regime at this income level — on top of everything else the new regime already saves through its lower rates and higher thresholds.
FAQ
₹75,000 for salary and pension income, for FY 2025-26 (AY 2026-27) — up from ₹50,000 in the new regime's earlier version, and ₹25,000 more than the old regime's ₹50,000.
Salaried employees and pensioners, whose income is taxed under the 'Salaries' head. It does NOT apply to business or professional income (freelancers, consultants) — see old vs new regime for freelancers — and family pension gets a different, smaller deduction (₹25,000 in the new regime, ₹15,000 in the old regime, or one-third of the pension if lower).
₹12,00,000 is the 87A rebate threshold, applied to TAXABLE income — income after the ₹75,000 standard deduction. So a ₹12,75,000 gross salary becomes exactly ₹12,00,000 taxable, which is fully covered by the rebate. Gross income below ₹12,75,000 stays at zero tax too; the number only starts moving once you're above ₹12,75,000.
Nothing dramatic — marginal relief means tax rises gently, not as a cliff. At ₹12,75,100 gross (just ₹100 more), tax works out to roughly ₹104 including cess, not a jump to full slab tax.
No — it's applied automatically by your employer during TDS calculation and reflected in your Form 16. There's no investment, proof, or declaration required, unlike most old-regime deductions.
Last verified: 12 Aug 2026
Source: incometax.gov.in — "Salaried Individuals for AY 2026-27" (https://www.incometax.gov.in/iec/foportal/help/individual/return-applicable-1). Not the site's general "New Tax vs Old Tax Regime FAQs" page, which is stale.
This is an indicative estimate for FY 2025-26 (AY 2026-27) based on the rules published on incometax.gov.in as understood at the time of writing. Confirm your exact liability with a qualified tax professional before filing or making financial decisions.