Wondering if the ₹50,000 standard deduction still applies under the new tax regime for FY 2024-25? Find out its impact on salaried employees and pensioners, tax calculations, and whether you should opt for the old or new regime to maximize savings.
When it comes to income tax calculations in India, standard deduction plays a crucial role in reducing taxable income for salaried individuals and pensioners. It is a flat deduction that taxpayers can claim without the need to submit any bills or proofs, making tax filing more straightforward. Over the years, standard deduction has been a valuable relief for taxpayers, helping them lower their tax liabilities effectively.
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With the introduction of the new tax regime, many taxpayers have been curious about whether the ₹50,000 standard deduction is still applicable. Initially, the new tax regime, introduced in FY 2020-21, aimed to simplify taxation by removing most deductions and exemptions. However, this raised concerns about whether salaried individuals and pensioners would still benefit from the standard deduction, which was available under the old tax regime.
The Union Budget 2023 brought key changes that addressed this concern, ensuring that standard deduction remains a part of the new tax regime. As we enter FY 2024-25, understanding these tax provisions is essential for making informed financial decisions. Salaried employees and pensioners must evaluate whether the new tax regime—with its lower tax rates but fewer deductions—is beneficial compared to the old regime, where standard deduction coexisted with several other tax-saving options.
This article explores the availability and impact of the ₹50,000 standard deduction in the new tax regime for FY 2024-25, helping taxpayers make the right choice when filing their income tax returns.
Understanding the Standard Deduction
What is Standard Deduction?
Standard deduction is a fixed deduction that salaried individuals and pensioners can claim to reduce their taxable income. Unlike other deductions under the Income Tax Act, standard deduction does not require any supporting documents, making it a simple and hassle-free way to lower tax liability.
For example, if a salaried employee earns ₹8,00,000 per year, applying the ₹50,000 standard deduction reduces their taxable income to ₹7,50,000, thereby lowering the amount on which tax is calculated.
Evolution of Standard Deduction in India
The concept of standard deduction has undergone multiple changes over the years:
- Before 2005: The standard deduction was available for salaried employees with varying limits depending on income. However, it was abolished in 2005 as part of tax reforms.
- Reintroduced in Budget 2018: Recognizing the need for tax relief, the government reinstated standard deduction at ₹40,000 for salaried employees and pensioners.
- Increased in Budget 2019: The deduction was raised to ₹50,000 to further benefit taxpayers.
- New Tax Regime Introduction (2020-21): Initially, the standard deduction was not available under the new regime, leading to debates on its fairness.
- Budget 2023 Amendment: The government allowed the ₹50,000 standard deduction in the new tax regime, aligning it with the old regime.
Who Can Claim Standard Deduction?
The standard deduction applies to two key taxpayer groups:
- Salaried Employees – Any individual earning a salary from an employer can claim the deduction, regardless of their income level.
- Pensioners – Even after retirement, pension income is considered salaried income for tax purposes, allowing pensioners to claim the ₹50,000 standard deduction.
Unlike deductions under Sections 80C, 80D, or HRA, which require specific expenses, standard deduction is a default benefit available to all eligible taxpayers without conditions.
In the next section, we will explore how standard deduction works in the old and new tax regimes and whether it remains beneficial under the FY 2024-25 tax structure.
Standard Deduction in the Old vs. New Tax Regime
The introduction of the new tax regime brought a significant shift in the way income tax is calculated in India. One of the key differences between the old and new tax regimes has been the treatment of deductions and exemptions, including the ₹50,000 standard deduction. Let’s examine how standard deduction has evolved under both systems and whether it remains applicable in FY 2024-25.
Old Tax Regime: Standard Deduction Availability and Tax Benefits
Under the old tax regime, taxpayers were allowed to claim multiple deductions and exemptions to reduce their taxable income. Some of the key deductions included:
- Standard Deduction: ₹50,000 (for salaried individuals and pensioners)
- House Rent Allowance (HRA)
- Deductions under Section 80C (EPF, PPF, Life Insurance, ELSS, etc.)
- Deductions under Section 80D (Health Insurance)
- Interest on Home Loan (Section 24(b))
The ₹50,000 standard deduction provided immediate relief to taxpayers by reducing taxable income without requiring investment proof. This deduction, combined with other exemptions, made the old tax regime beneficial for individuals with multiple tax-saving avenues.
New Tax Regime (Before Budget 2023): No Standard Deduction Initially
When the new tax regime was introduced in FY 2020-21, it aimed to simplify the tax structure by offering lower tax rates while removing most deductions and exemptions. As a result:
- Standard deduction was NOT available in the new tax regime.
- Taxpayers had to choose between the old tax regime (with deductions) and the new tax regime (with lower tax rates but no deductions).
This led to concerns among salaried employees and pensioners, as they lost the ₹50,000 standard deduction if they opted for the new tax regime. Since other exemptions like HRA, 80C, and 80D were also removed, many taxpayers found the old tax regime to be more beneficial despite the higher tax rates.
Post-Budget 2023 & FY 2024-25 Updates: Standard Deduction is Now Available
Recognizing the need for tax relief, the Union Budget 2023 reintroduced the ₹50,000 standard deduction in the new tax regime. This change made the new tax regime more attractive for salaried individuals and pensioners.
For FY 2024-25, the key updates regarding standard deduction are:
- ₹50,000 standard deduction is available in both the old and new tax regimes.
- The new tax regime is now the default tax regime, but taxpayers can switch to the old regime if preferred.
- Individuals with income up to ₹7 lakh in the new tax regime get a full tax rebate under Section 87A, making tax filing easier for lower-income earners.
This update has made the new tax regime more competitive, particularly for those who do not have significant tax-saving investments. In the next section, we will analyze who benefits most from the standard deduction in the new tax regime and whether it helps taxpayers save more compared to the old system.
Is the ₹50,000 Standard Deduction Still Available in the New Tax Regime for FY 2024-25?
With the shift towards a simplified taxation system, many taxpayers have been wondering whether the ₹50,000 standard deduction remains available under the new tax regime for FY 2024-25. Let’s break it down in detail.
Is the ₹50,000 Standard Deduction Still Available?
Yes, the ₹50,000 standard deduction is still available in the new tax regime for FY 2024-25. The Union Budget 2023 introduced this change, ensuring that salaried individuals and pensioners can claim the same deduction under both tax regimes. This was a major relief, as the absence of deductions initially made the new tax regime less attractive to many taxpayers.
For salaried employees and pensioners, this means they can now reduce their taxable income by ₹50,000, even if they opt for the new tax regime.
How Does the Standard Deduction Benefit Taxpayers Under the New Tax Regime?
The inclusion of standard deduction in the new tax regime brings several advantages:
- Direct Tax Savings: It reduces taxable income by ₹50,000, leading to lower tax liability.
- Simplified Tax Filing: Unlike other deductions that require documentation, the standard deduction is automatically applied without any need for investment proof.
- Higher Disposable Income: With lower tax outgo, taxpayers can retain more of their earnings for spending or savings.
For example, let’s consider a salaried individual with a gross income of ₹8,00,000 under the new tax regime:
- Before Budget 2023 (No Standard Deduction): Taxable income = ₹8,00,000
- After Budget 2023 (With Standard Deduction): Taxable income = ₹7,50,000
This simple deduction results in significant tax savings across different income brackets.
Comparison With Other Deductions/Exemptions Not Available in the New Regime
While the standard deduction is now included in the new tax regime, several other popular deductions and exemptions are still NOT available, including:
- House Rent Allowance (HRA)
- Deductions under Section 80C (PPF, EPF, Life Insurance, ELSS, etc.)
- Deductions under Section 80D (Health Insurance Premiums)
- Interest on Home Loan under Section 24(b)
This means that while the ₹50,000 standard deduction helps reduce tax liability, individuals who claim multiple tax-saving deductions may still find the old tax regime more beneficial.
In the next section, we will explore how standard deduction impacts salaried employees and pensioners differently and whether it provides equal benefits across income groups.
Standard Deduction for Salaried Employees vs. Pensioners
The ₹50,000 standard deduction is available to both salaried employees and pensioners under both the old and new tax regimes. However, its application and impact can vary depending on the taxpayer’s income type and tax bracket. Let’s explore how it affects these two groups.
Standard Deduction for Salaried Employees
For salaried individuals, the standard deduction provides a direct reduction in gross taxable salary before tax calculations. Here’s how it applies under both regimes:
Old Tax Regime:
- Taxable Salary = Gross Salary – Standard Deduction (₹50,000) – Other Deductions (80C, 80D, HRA, etc.)
- Since multiple deductions are available, salaried employees with tax-saving investments often find this regime more beneficial.
New Tax Regime (FY 2024-25):
- Taxable Salary = Gross Salary – ₹50,000 Standard Deduction (No Other Deductions Allowed)
- The new tax regime offers lower tax rates but does not allow other deductions like 80C, HRA, or home loan interest.
- With the ₹50,000 standard deduction now included, the new regime has become more attractive for those who don’t have significant tax-saving investments.
Example Calculation for Salaried Employees
Let’s compare tax calculations for a salaried individual earning ₹10,00,000 under both regimes:
| Particulars | Old Tax Regime (₹) | New Tax Regime (₹) |
|---|---|---|
| Gross Salary | 10,00,000 | 10,00,000 |
| Standard Deduction | (-) 50,000 | (-) 50,000 |
| Other Deductions (80C, HRA, 80D, etc.) | (-) 1,50,000 | Not Allowed |
| Taxable Income | 8,00,000 | 9,50,000 |
| Tax Payable (approx.) | ₹54,600 | ₹52,500 |
Conclusion: If the employee is eligible for multiple deductions, the old tax regime is more beneficial. However, for those with fewer deductions, the new tax regime may offer better tax savings.
Standard Deduction for Pensioners
Pensioners also qualify for the ₹50,000 standard deduction, as pension income is considered a part of "salary income" under income tax rules.
Key Points for Pensioners:
- Pensioners cannot claim deductions like HRA, but they can avail deductions under 80C (PPF, Senior Citizens’ Savings Scheme) and 80D (Health Insurance Premiums) in the old tax regime.
- If a pensioner opts for the new tax regime, they can only claim the standard deduction and not other exemptions.
- Family pensioners (recipients of pension after the pensioner’s death) do NOT get the full ₹50,000 standard deduction but instead can claim ₹15,000 or one-third of pension income (whichever is lower) under Section 57(iia).
Example Calculation for Pensioners (₹8,00,000 Pension Income)
| Particulars | Old Tax Regime (₹) | New Tax Regime (₹) |
|---|---|---|
| Annual Pension | 8,00,000 | 8,00,000 |
| Standard Deduction | (-) 50,000 | (-) 50,000 |
| Other Deductions (80C, 80D, etc.) | (-) 75,000 | Not Allowed |
| Taxable Income | 6,75,000 | 7,50,000 |
| Tax Payable (approx.) | ₹33,800 | ₹31,200 |
Conclusion:
- Pensioners with higher medical expenses or tax-saving investments may still benefit from the old tax regime.
- Those with no major deductions will likely find the new tax regime more convenient.
Key Differences in Tax Calculations for Salaried Employees vs. Pensioners
| Factor | Salaried Employees | Pensioners |
|---|---|---|
| Eligible for ₹50,000 Standard Deduction? | Yes | Yes |
| Other Deductions Allowed in Old Tax Regime? | Yes (80C, 80D, HRA, etc.) | Yes (80C, 80D, but NO HRA) |
| Other Deductions Allowed in New Tax Regime? | No | No |
| Family Pension Standard Deduction? | No Special Provisions | ₹15,000 or 1/3rd of Pension (Whichever is Lower) |
| Best Regime for Maximum Savings? | Depends on Deduction Eligibility | Depends on Medical & Investment Deductions |
In the next section, we will discuss who benefits the most from the standard deduction in FY 2024-25 and how to choose the right tax regime based on individual financial situations.
Standard Deduction for Assessment Year 2025-26 (AY 2025-26)
As the income tax filing for AY 2025-26 (FY 2024-25) approaches, taxpayers need clarity on how the ₹50,000 standard deduction affects their taxable income and tax liability. Let’s analyze its impact with examples and determine whether it influences eligibility for the Section 87A rebate.
Standard Deduction for AY 2025-26: Key Points
- The ₹50,000 standard deduction is applicable under both old and new tax regimes for salaried individuals and pensioners.
- The new tax regime remains the default option, but taxpayers can choose to opt for the old tax regime if they have substantial deductions.
- No documentation or investment proof is required to claim this deduction—it is automatically applied to eligible taxpayers.
Tax Calculation Example for AY 2025-26 (With and Without Standard Deduction)
Let’s compare tax calculations for a salaried individual with an annual income of ₹7,50,000, considering both tax regimes and the impact of standard deduction:
| Particulars | Old Tax Regime (₹) | New Tax Regime (₹) (Before Budget 2023) | New Tax Regime (₹) (After Budget 2023 & AY 2025-26) |
|---|---|---|---|
| Gross Income | 7,50,000 | 7,50,000 | 7,50,000 |
| Standard Deduction | (-) 50,000 | Not Applicable | (-) 50,000 |
| Other Deductions (80C, 80D, etc.) | (-) 1,50,000 | Not Applicable | Not Applicable |
| Taxable Income | 5,50,000 | 7,50,000 | 7,00,000 |
| Tax Payable (Before Rebate 87A) | ₹23,400 | ₹39,000 | ₹31,200 |
| Rebate Under Section 87A | Full Rebate (Income < ₹7 lakh) | No Rebate (Income > ₹7 lakh) | Full Rebate (Income ≤ ₹7 lakh) |
| Final Tax Payable | ₹0 | ₹39,000 | ₹0 |
Does Standard Deduction Impact Rebate Eligibility Under Section 87A?
Yes, the standard deduction plays a crucial role in determining whether an individual qualifies for the ₹7 lakh income tax rebate under Section 87A in the new tax regime.
- Before Budget 2023, if a taxpayer had an income of ₹7,50,000 in the new tax regime, they had to pay tax since no deductions were allowed.
- After Budget 2023, the ₹50,000 standard deduction reduces taxable income to ₹7,00,000, making them eligible for the full tax rebate under Section 87A.
- This means no tax liability for individuals with gross income up to ₹7,50,000 in the new tax regime for AY 2025-26.
Important Takeaway: If your gross income is slightly above ₹7 lakh, the standard deduction can help bring it down, making you eligible for a zero tax liability under Section 87A. However, if your income is well above ₹7 lakh, you will have to pay tax based on the applicable slab rates.
For AY 2025-26, the ₹50,000 standard deduction continues to provide tax relief to salaried individuals and pensioners under both tax regimes. It also helps taxpayers qualify for the Section 87A rebate, ensuring zero tax liability for incomes up to ₹7,50,000 in the new tax regime.
 |
| Standard Deduction - New Tax Regime |
Pros and Cons of Standard Deduction Under the New Tax Regime
The inclusion of the ₹50,000 standard deduction in the new tax regime has made it more attractive for taxpayers. However, it comes with both advantages and disadvantages, especially when compared to the old tax regime, which allows multiple deductions and exemptions.
Advantages of Standard Deduction in the New Tax Regime
Simplified Tax Calculations
- Unlike the old tax regime, where taxpayers need to manage multiple deductions like HRA, 80C, and 80D, the new tax regime offers a straightforward approach.
- With the ₹50,000 standard deduction, taxpayers get an automatic reduction in taxable income without additional paperwork.
Uniform Benefit for All Salaried Individuals & Pensioners
- Every salaried person and pensioner, regardless of their salary structure or investment habits, is eligible for this flat ₹50,000 deduction.
- Unlike exemptions like HRA, which only benefits those paying rent, or 80C deductions, which require specific investments, the standard deduction applies universally.
No Need for Documentation or Investment Proofs
- Taxpayers do not have to submit investment proofs (like LIC premiums, PPF contributions, or health insurance documents) to claim this deduction.
- This is beneficial for those who do not want to invest in tax-saving instruments just to reduce tax liability.
Reduces Taxable Income and Helps in Rebate Eligibility
- Since the new tax regime allows the standard deduction, it helps taxpayers with an income of up to ₹7,50,000 qualify for zero tax liability under Section 87A rebate.
- Before Budget 2023, this deduction was missing, making tax liabilities slightly higher in the new tax regime.
Disadvantages of Standard Deduction in the New Tax Regime
Loss of Major Exemptions and Deductions
- While the new tax regime offers a lower tax rate, it does not allow deductions for:
- 80C (PPF, ELSS, EPF, LIC, etc.)
- 80D (Health insurance premium)
- HRA (House Rent Allowance)
- Home Loan Interest Deduction (Section 24B)
- In the old tax regime, taxpayers could claim multiple deductions, reducing taxable income significantly.
Not Beneficial for Those With High Tax-Saving Investments
- If a taxpayer has high deductions under 80C, 80D, and home loan interest, the old tax regime is still more beneficial, even with the ₹50,000 standard deduction in the new tax regime.
- Example: Someone who claims ₹2.5–₹3 lakh in deductions under the old tax regime will have lower taxable income compared to the new tax regime, even with the ₹50,000 deduction.
No Flexibility in Tax Planning
- In the old tax regime, taxpayers could plan their investments based on tax-saving options.
- The new tax regime is fixed, meaning taxpayers cannot optimize tax liability based on personal financial goals.
Not Suitable for Certain Categories of Taxpayers
- Rent-paying employees benefit from HRA in the old tax regime. The new regime removes this advantage.
- Self-employed individuals or business owners cannot claim the ₹50,000 standard deduction, as it is available only for salaried individuals and pensioners.
Final Verdict: Should You Choose the New Tax Regime for the Standard Deduction?
| Factor | Old Tax Regime (₹50,000 Standard Deduction + Other Deductions) | New Tax Regime (₹50,000 Standard Deduction Only) |
|---|---|---|
| Tax Rates | Higher | Lower |
| Standard Deduction | Available | Available |
| Other Deductions (80C, 80D, HRA, Home Loan Interest, etc.) | Allowed | Not Allowed |
| Ideal for Taxpayers Who | Have high tax-saving investments and want flexibility | Prefer simple tax filing and don’t claim many deductions |
- If you have high deductions, the old tax regime is still better.
- If you don’t have major deductions, the new tax regime (with standard deduction) is beneficial due to lower tax rates.
How Standard Deduction Affects Taxpayers in Different Income Brackets
The ₹50,000 standard deduction plays a significant role in reducing taxable income, particularly in the new tax regime. However, its impact varies across different income levels. Below, we compare how taxpayers earning ₹5 lakh, ₹10 lakh, and ₹15 lakh benefit from the standard deduction under both tax regimes.
Tax Calculation Examples for Different Income Levels
Example 1: Income ₹5 Lakh
A taxpayer earning ₹5 lakh falls under the zero-tax bracket in both regimes due to the Section 87A rebate. However, let's see how the standard deduction impacts taxable income.
| Particulars | Old Tax Regime (₹) | New Tax Regime (₹) |
|---|---|---|
| Gross Income | 5,00,000 | 5,00,000 |
| Standard Deduction | (-) 50,000 | (-) 50,000 |
| Taxable Income | 4,50,000 | 4,50,000 |
| Tax Before Rebate | 0 (within basic exemption limit) | 0 (within basic exemption limit) |
| Tax After Rebate (Section 87A) | ₹0 | ₹0 |
Taxpayer pays zero tax in both regimes, making standard deduction beneficial only in reducing taxable income.
Example 2: Income ₹10 Lakh
For a taxpayer earning ₹10 lakh, we compare tax liability under both tax regimes:
| Particulars | Old Tax Regime (₹) | New Tax Regime (₹) |
|---|---|---|
| Gross Income | 10,00,000 | 10,00,000 |
| Standard Deduction | (-) 50,000 | (-) 50,000 |
| Other Deductions (80C, 80D, etc.) | (-) 2,00,000 | Not Available |
| Taxable Income | 7,50,000 | 9,50,000 |
| Tax Liability Before Rebate | 54,600 | 54,600 |
| Final Tax Payable | ₹54,600 | ₹54,600 |
- The new tax regime seems beneficial at ₹10 lakh, as the tax liability remains the same but with fewer documentation requirements.
- However, if the taxpayer claims higher deductions (₹2.5 lakh or more), the old tax regime could be better.
Example 3: Income ₹15 Lakh
For a higher-income taxpayer, tax liability significantly changes based on the chosen regime.
| Particulars | Old Tax Regime (₹) | New Tax Regime (₹) |
|---|---|---|
| Gross Income | 15,00,000 | 15,00,000 |
| Standard Deduction | (-) 50,000 | (-) 50,000 |
| Other Deductions (80C, 80D, Home Loan, etc.) | (-) 2,50,000 | Not Available |
| Taxable Income | 12,00,000 | 14,50,000 |
| Tax Payable | ₹1,34,160 | ₹1,45,000 |
- The old tax regime helps in saving more tax due to additional deductions.
- The new tax regime leads to higher tax outgo as no other deductions are allowed.
Key Takeaways: Standard Deduction Across Income Brackets
| Income Level | Best Regime Based on Standard Deduction | Why? |
|---|---|---|
| ₹5 Lakh | Either (No Tax Payable) | Standard deduction applies, but tax is zero in both regimes due to rebate. |
| ₹10 Lakh | New Tax Regime (if no investments) | Standard deduction simplifies tax filing, but those with high deductions (₹2.5L+) may prefer the old regime. |
| ₹15 Lakh | Old Tax Regime (More Savings) | The old tax regime provides better savings due to deductions like 80C, 80D, and home loan interest. |
- Low-income taxpayers benefit equally in both regimes due to the Section 87A rebate.
- Middle-income taxpayers need to evaluate if they have sufficient deductions to choose the old tax regime.
- Higher-income taxpayers generally save more under the old tax regime if they have multiple deductions.
Should You Opt for the New Tax Regime with Standard Deduction?
With the inclusion of the ₹50,000 standard deduction, the new tax regime has become more attractive, especially for salaried individuals and pensioners. However, choosing between the old tax regime and the new tax regime depends on various factors such as income level, eligibility for deductions, and financial planning goals.
Key Factors to Consider Before Choosing the New Tax Regime
1. Income Level
- For taxpayers with income below ₹7,50,000, the new tax regime is beneficial due to the ₹50,000 standard deduction and 100% tax rebate under Section 87A.
- For higher-income earners (₹10 lakh+), the choice depends on whether they can claim enough deductions under the old tax regime to make it more beneficial.
2. Eligibility for Deductions & Exemptions
- The old tax regime allows deductions for:
- Section 80C (PPF, EPF, Life Insurance, ELSS, etc.)
- Section 80D (Health Insurance Premiums)
- HRA (House Rent Allowance)
- Home Loan Interest Deduction (Section 24B)
- The new tax regime only allows the ₹50,000 standard deduction without other deductions.
- If a taxpayer claims ₹2.5 lakh or more in deductions, the old tax regime is likely to be more tax-efficient.
3. Tax Filing Simplicity vs. Tax Savings
- New Tax Regime:
- Lower tax rates but fewer deductions.
- No need for investment proofs, making tax filing simple.
- Old Tax Regime:
- More tax-saving opportunities but requires investment planning.
- Taxpayers must track eligible deductions and exemptions.
4. Long-Term Financial Goals
- Taxpayers who prefer to save for retirement, children's education, or home loans benefit from the old tax regime since it rewards disciplined investing.
- Those who do not want to lock their money in tax-saving instruments may prefer the new tax regime, as it provides flexibility in financial planning.
Who Benefits the Most from the New Tax Regime?
Taxpayers with No or Minimal Investments
- If you do not invest in tax-saving options like PPF, EPF, NPS, or ELSS, the new tax regime is a better choice due to lower tax rates and the standard deduction benefit.
Salaried Individuals Earning Up to ₹7.5 Lakh
- With the ₹50,000 standard deduction, taxable income is reduced, and Section 87A rebate ensures zero tax liability.
Pensioners Without Major Deductions
- Retired individuals with no active investments or loans can benefit from the new tax regime, as it offers a flat ₹50,000 deduction without requiring investment commitments.
Individuals Looking for Simplified Tax Filing
- No need to maintain tax-saving documentation or proofs.
Should High-Income Earners Stick to the Old Regime?
For taxpayers earning ₹10 lakh and above, the decision depends on whether they can claim substantial deductions.
| Income Level | New Tax Regime (with Standard Deduction) | Old Tax Regime (with Deductions) | Which is Better? |
|---|---|---|---|
| ₹5 Lakh | ₹0 tax (87A rebate) | ₹0 tax (87A rebate) | Both are equal |
| ₹10 Lakh | ₹54,600 tax | ₹54,600 tax (if no deductions) | Depends on deductions |
| ₹15 Lakh | ₹1,45,000 tax | ₹1,34,160 tax (with deductions) | Old regime is better if claiming ₹2.5L+ deductions |
- If total deductions (80C, 80D, HRA, home loan, etc.) exceed ₹2.5 lakh, the old tax regime offers more savings.
- If deductions are minimal, the new tax regime is simpler and beneficial.
Final Decision: Which Tax Regime Should You Choose?
| If You… | Best Tax Regime |
|---|---|
| Earn below ₹7.5 lakh | New Tax Regime (₹50,000 standard deduction + 87A rebate = Zero tax) |
| Have high deductions (80C, 80D, home loan, HRA, etc.) | Old Tax Regime (More tax savings) |
| Prefer lower tax rates & easy tax filing | New Tax Regime (No documentation needed) |
| Are a pensioner with no other deductions | New Tax Regime (₹50,000 deduction still applies) |
| Are a high-income earner (₹15 lakh+) with tax-saving investments | Old Tax Regime (More deductions = more savings) |
- For low and middle-income earners, the new tax regime is beneficial if they do not claim many deductions.
- For high-income earners who utilize tax-saving deductions, the old tax regime still offers better tax savings.
Conclusion
The ₹50,000 standard deduction remains available for both the old and new tax regimes in FY 2024-25, benefiting salaried employees and pensioners. This change, introduced in Budget 2023, makes the new tax regime more competitive by providing at least some level of income reduction before taxation.
Who Benefits the Most from the Standard Deduction?
- Salaried employees and pensioners – The flat ₹50,000 deduction applies uniformly, reducing taxable income without requiring investment proofs.
- Individuals earning up to ₹7.5 lakh – Due to the standard deduction + Section 87A rebate, they can pay zero tax under the new tax regime.
- Taxpayers who do not claim other deductions – Those who don’t invest in PPF, EPF, NPS, or insurance may find the new tax regime simpler and beneficial.
Final Recommendation: Old vs. New Tax Regime
| If You… | Best Tax Regime to Choose |
|---|---|
| Earn below ₹7.5 lakh | New Tax Regime (Zero tax due to rebate + standard deduction) |
| Have significant deductions (80C, 80D, HRA, home loan, etc.) | Old Tax Regime (More tax savings) |
| Prefer lower tax rates and simplified filing | New Tax Regime (No documentation required) |
| Are a pensioner with no other deductions | New Tax Regime (₹50,000 deduction still applies) |
| Are a high-income earner (₹15 lakh+) with tax-saving investments | Old Tax Regime (More deductions = More savings) |
- If you claim ₹2.5 lakh+ in deductions, the old tax regime is likely the better option.
- If you do not claim many deductions and prefer simple tax filing, the new tax regime is better.
Ultimately, taxpayers should carefully compare both regimes and use an income tax calculator to determine the most tax-efficient choice for their financial situation.
FAQ
Is standard deduction applicable in the new tax regime for self-employed individuals?
No, the ₹50,000 standard deduction is only available for salaried employees and pensioners. Self-employed individuals are not eligible for this deduction under either the old or new tax regime. However, they may benefit from other tax provisions like presumptive taxation under Section 44ADA or 44AD.
Can I claim additional deductions apart from the ₹50,000 standard deduction?
No, under the new tax regime, no other deductions such as 80C (Investments), 80D (Health Insurance), HRA (House Rent Allowance), or Home Loan Interest (Section 24b) are allowed. The ₹50,000 standard deduction is the only deduction available to salaried individuals and pensioners in this regime.
Will standard deduction increase in future budgets?
As of now, there is no official announcement about an increase in the ₹50,000 standard deduction. However, future Union Budgets may revise this amount based on inflation and taxpayer needs.
How does standard deduction impact TDS calculations for salaried individuals?
Employers automatically consider the ₹50,000 standard deduction while calculating TDS on salary. It helps reduce taxable income and, consequently, the tax deducted at source. Employees should verify that their employer applies this deduction correctly to avoid excess tax deductions.