Standard Deduction for Salaried and Pensioners: Guide 2026

The standard deduction is a flat amount the Income-tax Act lets every salaried employee and pensioner subtract from income before tax is calculated, with no bills, receipts, or proof required. For AY 2026-27 it is Rs 50,000 in the old regime and Rs 75,000 in the new regime. Unlike most Chapter VI-A deductions like 80C or 80D, this one survives in the new regime too, which is what makes it the single most valuable deduction for ordinary salaried earners and retirees.

It is a fixed deduction allowed under Section 16(ia) of the Income-tax Act, 1961. You do not spend anything to claim it and you do not prove anything. The employer or pension payer applies it automatically, and the income tax return utility fills it in. It replaced the old transport and medical allowances and now stands as one clean number.

There are two distinct deductions that people often confuse, because both are loosely called a “standard deduction” on pension. They sit under different heads of income.

1. Section 16(ia), under the head Salaries. This is the main standard deduction of Rs 50,000 (old) or Rs 75,000 (new). It applies to salary and to pension you receive from your own former employer, because such pension is taxed as salary.
2. Section 57(iia), under Income from Other Sources. This is the deduction on family pension, the pension paid to a spouse or dependant after the pensioner dies. It is Rs 15,000 or one-third of the pension, whichever is lower, in the old regime, raised to Rs 25,000 or one-third, whichever is lower, in the new regime by the Finance (No. 2) Act, 2024.

The higher Rs 75,000 figure under Section 16(ia) was also introduced by the Finance (No. 2) Act, 2024 and applies only to taxpayers in the new regime under Section 115BAC. The new regime is the default for AY 2026-27 unless you opt out.

The new regime gives a Section 87A rebate that zeroes out tax on taxable income up to Rs 12,00,000 for FY 2025-26. A salaried person first subtracts the Rs 75,000 standard deduction, so a gross salary of Rs 12,75,000 brings taxable income down to Rs 12,00,000, which the rebate then wipes out. That is how a salaried taxpayer can earn up to Rs 12.75 lakh and pay zero tax under the new regime. A pensioner drawing pension from a former employer gets the same Rs 75,000 cushion.

For the rebate mechanics, see the Section 87A rebate guide.

1. Decide your regime. The new regime is the default. To use the old regime you file Form 10-IEA. See how to switch regime while filing.
2. Add up your gross salary or pension for the year from Form 16 or the pension slip.
3. Subtract the standard deduction: Rs 50,000 (old) or Rs 75,000 (new). The ITR utility does this automatically once you enter salary or pension income.
4. For family pension, enter it under Income from Other Sources and the utility applies the Section 57(iia) deduction.
5. Pick the right return form and file. See which ITR form to file for 2026-27.

🧾 Enter income ➡️ ✂️ Auto deduct standard deduction ➡️ 🧮 Apply 87A rebate ➡️ ✅ File return

• Nothing to prove the standard deduction itself. It is automatic.
• Form 16 from the employer, or the pension payment slip or bank statement showing pension credited.
• For family pension, a bank statement showing the credit and the sanction letter if asked.

• Claiming Rs 75,000 in the old regime. The old regime allows only Rs 50,000 under Section 16(ia). The higher figure is new regime only.
• Treating family pension as salary. Family pension is Income from Other Sources and gets the Section 57(iia) deduction, not the Section 16(ia) standard deduction. For how the pension amount itself is worked out, see family pension calculation under CCS rules.
• Applying it to other income. The standard deduction comes off salary or pension only. It does not reduce rent, capital gains, interest, or business income.
• Forgetting advance tax. If pension and other income create a tax liability after the standard deduction, pay on time. See advance tax due dates and how to pay.

Take a Pune-based salaried taxpayer earning a gross salary of Rs 12,70,000 in FY 2025-26 and staying in the default new regime. She subtracts the Rs 75,000 standard deduction, leaving taxable income of Rs 11,95,000. Because that is under Rs 12,00,000, the Section 87A rebate cancels the tax, so she pays zero. A retired colleague drawing Rs 6,00,000 pension from his former employer subtracts the same Rs 75,000, bringing taxable pension to Rs 5,25,000, again inside the rebate band, so his tax is also nil. The figures here are illustrative.

Yes. It is one of the few deductions that survives in the new regime. It is Rs 75,000 there for FY 2025-26, against Rs 50,000 in the old regime.

Yes. Pension from your own former employer is taxed as salary, so the full Section 16(ia) standard deduction applies, Rs 50,000 in the old regime or Rs 75,000 in the new regime.

Family pension received by a dependant is deducted under Section 57(iia): Rs 15,000 or one-third of the pension, whichever is lower, in the old regime, and Rs 25,000 or one-third, whichever is lower, in the new regime.

No. The standard deduction is a flat amount with no proof, bills, or investment needed. The return utility applies it once you enter salary or pension income.

No. It only reduces salary and pension income. Rent, interest, capital gains, and business income are not covered by Section 16(ia).

• Income-tax Act, 1961, Section 16(ia) and Section 57(iia), Finance (No. 2) Act, 2024.
• Income Tax Department, salaried individuals AY 2026-27: https://www.incometax.gov.in/iec/foportal/help/individual/return-applicable-1
• Budget 2025 zero-tax-up-to-Rs-12-lakh and Rs 12.75 lakh for salaried, PIB release PRID 2098406.

• Section 87A rebate and the Rs 12 lakh point
• Switching tax regime with Form 10-IEA
• Which ITR form to file for 2026-27
• Family pension calculation under CCS rules
• Advance tax due dates and how to pay
• Need to file an RTI about a pension or tax matter? Use the AI RTI Drafter.
• For the full citizen handbook, read The RTI Playbook.