STANDARD DEDUCTION UNDER NEW REGIME FY 2026-27 — SALARIED AND PENSIONER LIMITS

📌 INTRODUCTION

The standard deduction is one of the most useful tax benefits available to salaried employees and pensioners. It reduces taxable income without requiring the taxpayer to submit bills or investment proofs for the amount claimed.

For Tax Year 2026-27, the standard deduction under the new tax regime is ₹75,000 for income taxable under the head “Salaries”. This benefit is available to eligible salaried employees as well as pensioners whose pension is taxable as salary.

The increase from the earlier ₹50,000 limit makes the standard deduction particularly important while calculating taxable salary under the new regime.

💰 STANDARD DEDUCTION FOR SALARIED EMPLOYEES

Under the new tax regime, a salaried individual can claim a standard deduction of up to ₹75,000 from salary income.

The deduction is available automatically while computing taxable salary. The employee does not need to make any investment or incur any specific expenditure to claim it.

For example, if an employee has gross salary of ₹9,00,000 during Tax Year 2026-27:

Gross Salary = ₹9,00,000

Less: Standard Deduction = ₹75,000

Taxable Salary = ₹8,25,000

The standard deduction therefore directly reduces the amount of salary that becomes taxable.

📊 IS ₹75,000 AVAILABLE TO EVERY EMPLOYEE?

The ₹75,000 figure is the maximum standard deduction available under the new regime. It cannot exceed the amount of salary income.

For example, if the eligible salary income is only ₹60,000, the standard deduction cannot exceed ₹60,000.

Therefore, the practical rule is:

💼 Salary income → Standard deduction up to ₹75,000

📉 Salary lower than ₹75,000 → Deduction restricted to the salary amount

👴 STANDARD DEDUCTION FOR PENSIONERS

Pensioners should first identify the nature of pension they are receiving.

A regular pension received from a former employer is generally taxable under the head “Salaries”. Therefore, a pensioner receiving such taxable pension can claim the standard deduction applicable to salary income.

For Tax Year 2026-27, the standard deduction under the new regime is up to ₹75,000 for such pension income.

For example, if a retired employee receives a pension of ₹6,00,000 during the year:

Pension Income = ₹6,00,000

Less: Standard Deduction = ₹75,000

Taxable Pension = ₹5,25,000

This makes the standard deduction particularly useful for pensioners who rely primarily on their pension income.

⚠️ DO NOT CONFUSE PENSION WITH FAMILY PENSION

Family pension is treated differently from pension received by the retired employee.

Family pension is generally taxable under the head “Income from Other Sources” rather than “Salaries”.

Therefore, the ₹75,000 standard deduction applicable to salary income does not apply to family pension.

Instead, a separate deduction is available for eligible family pension under Section 57(iia), subject to the prescribed limit.

Under the new regime, the deduction for family pension is limited to one-third of the family pension or ₹25,000, whichever is lower.

For example, if family pension received during the year is ₹3,00,000:

Family Pension = ₹3,00,000

One-third of Family Pension = ₹1,00,000

Maximum Deduction = ₹25,000

Taxable Family Pension = ₹2,75,000

Therefore, pensioners and family pension recipients should not apply the same deduction rules to both types of income.

🏦 STANDARD DEDUCTION AND OTHER SALARY BENEFITS

The standard deduction is separate from the salary components received by an employee.

An employee may receive:

💼 Basic Salary

🏠 House Rent Allowance

🚗 Transport-related benefits

🎁 Perquisites

💰 Bonus

📈 Other taxable salary components

The standard deduction is applied while computing taxable income from salary, subject to the applicable tax regime and provisions.

However, choosing the new regime means that many exemptions and deductions available under the old regime are not available.

📋 WHAT IS NOT REQUIRED FOR STANDARD DEDUCTION?

One of the main advantages of the standard deduction is its simplicity.

The taxpayer does not generally need to:

🚫 Submit medical bills

🚫 Submit travel bills

🚫 Provide investment proof

🚫 Show actual expenditure

🚫 Maintain expenditure receipts specifically for claiming the standard deduction

The deduction is prescribed by law and is applied while calculating taxable salary.

💡 STANDARD DEDUCTION VS FAMILY PENSION DEDUCTION

The difference can be understood easily.

👨‍💼 SALARY / REGULAR PENSION

Head of Income → Salaries

New Regime Deduction → Up to ₹75,000

Section → Standard deduction under the salary provisions

👨‍👩‍👧 FAMILY PENSION

Head of Income → Income from Other Sources

New Regime Deduction → One-third of family pension or ₹25,000, whichever is lower

Section → 57(iia)

This distinction is important because many taxpayers incorrectly claim ₹75,000 against family pension.

🧮 SIMPLE EXAMPLE FOR A SALARIED EMPLOYEE

Suppose an employee earns ₹12,00,000 during Tax Year 2026-27 and opts for the new tax regime.

Gross Salary = ₹12,00,000

Less: Standard Deduction = ₹75,000

Taxable Salary = ₹11,25,000

The standard deduction reduces taxable salary by ₹75,000 before the applicable slab rates are applied.

The employee may then become eligible for other benefits available under the new regime, such as the applicable Section 87A rebate, depending on the final total income and the nature of income.

🧮 SIMPLE EXAMPLE FOR A PENSIONER

Suppose a retired employee receives regular pension of ₹8,00,000 during Tax Year 2026-27.

Regular Pension = ₹8,00,000

Less: Standard Deduction = ₹75,000

Taxable Pension = ₹7,25,000

The remaining taxable income is then considered along with any other taxable income of the pensioner.

⚠️ COMMON MISTAKES TO AVOID

Taxpayers often make mistakes while applying the standard deduction.

🚫 Assuming the standard deduction is ₹75,000 under every tax regime and every year.

🚫 Claiming ₹75,000 against family pension.

🚫 Claiming more than the actual salary or pension income.

🚫 Confusing standard deduction with other salary exemptions.

🚫 Assuming that choosing the new regime allows all deductions available under the old regime.

🚫 Calculating tax without considering the applicable rebate and other income.

📊 QUICK SUMMARY

👨‍💼 Salaried Employee

New Regime Standard Deduction → Up to ₹75,000

👴 Retired Employee receiving regular pension

New Regime Standard Deduction → Up to ₹75,000

👨‍👩‍👧 Family Pension

Deduction → One-third of family pension or ₹25,000, whichever is lower

📅 Tax Year

2026-27

💡 WHY THE STANDARD DEDUCTION MATTERS

The standard deduction is especially useful because it reduces taxable salary without requiring the taxpayer to make any additional investment.

For employees and pensioners opting for the new regime, it provides an automatic reduction in taxable income and makes salary-tax computation simpler.

However, taxpayers should remember that the standard deduction is only one component of the overall tax calculation. The final tax liability depends on total income, applicable slab rates, rebate, surcharge, cess and the nature of other income.

🏁 CONCLUSION

For Tax Year 2026-27, the standard deduction under the new tax regime is up to ₹75,000 for eligible salary income. This includes regular pension that is taxable under the head “Salaries”.

Family pension is different and does not qualify for the ₹75,000 salary standard deduction. Instead, eligible family pension can claim a separate deduction of one-third of the family pension or ₹25,000, whichever is lower, under the applicable provisions.

Therefore, employees and pensioners should first identify the nature of their income and then apply the correct deduction while preparing their tax computation. Using the correct treatment can help avoid errors in payroll, Form 16 and Income Tax Return filing.

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