Standard Deduction Old vs New Tax Regime FY 2026-27 India [Section 16(ia)]

Standard deduction for FY 2026-27 (Assessment Year 2027-28) in India is ₹75,000 under the new tax regime and ₹50,000 under the old tax regime for salaried employees and pensioners. That ₹25,000 gap, combined with the new regime’s ₹12 lakh rebate under Section 87A, stretches the zero-tax salary ceiling to ₹12.75 lakh — the single biggest benefit the standard deduction old vs new tax regime FY 2026-27 comparison reveals for ordinary salaried Indians. This guide walks through every rule under Section 16(ia), Budget 2024 history, and worked tax examples across ₹8L / ₹15L / ₹25L / ₹50L salary bands.

The headline numbers — standard deduction FY 2026-27 India

• New regime standard deduction: ₹75,000 for salaried + pensioners (increased from ₹50,000 in Budget 2024)
• Old regime standard deduction: ₹50,000 for salaried + pensioners (unchanged since FY 2019-20)
• Family pension standard deduction: ₹25,000 (new) or ₹15,000 (old) — Section 57(iia)
• Section: 16(ia) for employees; Section 57 for family pension
• Proof required: None. Flat deduction, applied automatically on ITR.

Model the two regimes side-by-side in our Income Tax Calculator — the standard deduction is pre-applied in both regimes.

Standard deduction history in India — Budget-by-Budget evolution

Before FY 2018-19, India did not have a flat standard deduction at all — the earlier transport allowance (₹19,200) and medical reimbursement (₹15,000) both needed proofs. Budget 2018 reintroduced the flat standard deduction at ₹40,000. Here’s the full timeline:

The ₹25,000 new-regime premium (₹75K minus ₹50K) has been Budget 2024’s single biggest incentive pushing salaried taxpayers to opt for the new regime. Combined with the ₹12 lakh 87A rebate ceiling for FY 2026-27, the government has engineered a scenario where > 80% of salaried Indians pay less tax in the new regime than the old — the standard deduction is the specific lever.

Standard deduction old vs new tax regime FY 2026-27 — side-by-side

For salaried employees without substantial HRA / home loan / 80C investments, the new regime’s ₹75K standard deduction + ₹12L rebate combination is unbeatable. Our worked examples below show the break-even.

The ₹12.75 lakh zero-tax threshold (new regime)

Under the new regime FY 2026-27, a salaried employee earning ₹12,75,000 gross salary pays zero income tax. Here’s the math:

• Gross salary: ₹12,75,000
• Less: Standard deduction (new regime): (₹75,000)
• Taxable income: ₹12,00,000
• Tax at new regime slabs (FY 2026-27): ₹60,000
• Less: Section 87A rebate (full, < ₹12L): (₹60,000)
• Net tax payable: ₹0

This is the single biggest salaried-employee benefit under the FY 2026-27 new regime. The ₹75,000 standard deduction is what stretches the zero-tax threshold from ₹12L to ₹12.75L.

Verify the zero-tax result at your specific salary using our Income Tax Calculator — run ₹12,75,000 salary, new regime, no deductions — tax output is ₹0.

Worked examples — standard deduction across salary bands

Example 1: ₹8 lakh salary (under rebate ceiling)

Young professional, ₹8L gross, no home loan, nominal ₹50K PPF:

New regime wins by ₹54,600. The combination of the higher standard deduction + ₹12L rebate eliminates tax entirely. The old regime’s ₹50K 80C deduction can’t offset the lack of rebate beyond ₹5L.

Example 2: ₹15 lakh salary with home loan

Mid-career, ₹15L gross, ₹50L home loan (interest ₹4L/yr, principal ₹85K/yr), ₹1.5L EPF + PPF combined, ₹25K health insurance:

New regime wins by ~₹38,000 despite forfeiting ₹3.75L of deductions. The higher standard deduction + lower slab rates make this possible. Once salary crosses ₹12L, the rebate no longer applies, so it’s a pure slab-rate comparison — and new regime wins unless deductions exceed ~₹4L.

Example 3: ₹25 lakh salary, metro renter

Mumbai-based senior manager, ₹25L gross, ₹45K/month rent (HRA exemption ~₹4.27L), full ₹1.5L 80C, ₹25K 80D, no home loan:

• Old regime: ₹25L gross − ₹50K std − ₹4.27L HRA − ₹1.5L 80C − ₹25K 80D = ₹18.48L taxable → tax ~₹3.28L
• New regime: ₹25L − ₹75K std = ₹24.25L taxable → tax ~₹3.23L

New regime narrowly wins by ~₹5,000. For metro renters with big HRA, the old regime is often decisive — but only if HRA + 80C + 80D + 24b combined exceed ~₹4L. At ₹25L salary without home loan, the math is too close to care — whichever is slightly cheaper.

Example 4: ₹50 lakh salary, senior executive

• Old regime (with HRA + 80C + 80D + 24b): ~₹11.2L tax
• New regime (only std ded ₹75K): ~₹11.0L tax

New regime edges ahead by ~₹20,000. Surcharge caps help the new regime at higher salaries. The ₹75,000 standard deduction is a small but real contributor even at high brackets.

Who cannot claim standard deduction

Standard deduction under Section 16(ia) is strictly for salaried employees + pensioners. Categories that cannot claim:

• Self-employed / business owners: income taxed under “Profits and Gains of Business or Profession” (PGBP). No standard deduction. Instead, claim business expenses.
• Consultants / freelancers (44ADA presumptive): declared income is already at 50% of receipts — no additional standard deduction.
• Capital-gains-only earners: LTCG / STCG income has its own tax rates (Section 111A, 112); no standard deduction against capital gains.
• Rental-income-only earners: house property income gets its own flat 30% standard deduction under Section 24(a). That’s different from Section 16(ia).
• NRI without salary income: if no Indian salary, no standard deduction. Rental / capital gains are taxed per their own rules.

Standard deduction for pensioners

The FY 2024-25 amendment extended standard deduction benefits to pensioners uniformly:

• Employer pension (Central Govt, State Govt, company pension): full ₹75,000 (new) / ₹50,000 (old) — treated as salary
• Annuity from insurer (immediate / deferred): treated as salary in hands of recipient; full standard deduction applies
• NPS annuity post-60: salary treatment; full standard deduction
• Family pension (Section 57): ₹25,000 (new) or ₹15,000 (old) — halved because family pension is a concessional benefit

Standard deduction + HRA + 80C — can you stack?

Yes, in the old regime, standard deduction stacks with every other deduction:

• Standard deduction ₹50,000
• HRA exemption (Section 10(13A))
• Section 80C ₹1.5L
• Section 80D ₹25K / ₹75K (self + parents)
• Section 24(b) home loan interest ₹2L
• Section 80E education loan interest (no cap)
• Section 80G donations

A Mumbai renter with home loan can easily stack ₹8-10L of deductions under the old regime. At that level, old regime is hard to beat — run the comparison via our Income Tax Calculator.

Regime-switch rules for salaried employees

Salaried employees can switch between old and new regimes every financial year. Process:

1. Default regime (FY 2023-24 onwards): new regime. If you do nothing, TDS is deducted under new regime.
2. To opt for old regime: submit Form 10IEA to your employer at the start of the FY (April) or when you file ITR.
3. Business income earners: once you opt out of new regime (i.e., choose old), you can switch back to new only once in your lifetime (Section 115BAC).
4. Salaried / pensioners: can flip back and forth every FY freely.

Common mistakes with standard deduction

• Assuming standard deduction isn’t available in new regime. It IS — and it’s even higher there (₹75K vs ₹50K). This is the most common misconception.
• Double-counting old-regime ₹19,200 transport allowance + ₹15,000 medical reimbursement. Those were consolidated into the ₹50,000 standard deduction in FY 2019-20. You can’t add them separately anymore.
• Forgetting to update Form 10IEA choice. Employer deducts TDS based on whatever regime choice was filed. Wrong choice = wrong TDS = refund / extra tax at filing.
• Missing standard deduction on retirement. Pensioners often miss that pension counts as salary for this purpose — they should claim ₹75K / ₹50K like active employees.

Decision framework: which regime for your profile

Salaried, CTC under ₹12.75L, basic deductions

New regime wins. The ₹75K standard deduction + ₹12L rebate = zero or near-zero tax. Only old regime is better if you have ₹4L+ of combined HRA + home loan + 80C deductions (rare at this salary).

Salaried, CTC ₹12.75L - ₹25L, home loan + HRA + 80C

Old regime often wins — but only if deductions exceed ~₹4L. Use the Income Tax Calculator with your specific deduction profile. At ₹20L salary with a ₹2L home loan interest + ₹4L HRA + ₹1.5L 80C = ~₹7.5L of deductions. Old regime taxable = ₹12.5L vs new regime taxable = ₹19.25L — old regime wins by ~₹1.2L.

Salaried, CTC ₹25L+, no home loan

New regime usually wins. Without the ₹3.5L home loan deductions (24b + 80C principal), old regime lacks firepower. The ₹75K standard deduction + lower slabs in new regime outweigh ₹4L HRA + ₹1.5L 80C + ₹25K 80D (total ~₹5.75L).

Salaried, CTC ₹50L+, surcharge territory

New regime typically wins. Surcharge caps in the new regime (25% max vs 37% in old) save more than any standard deduction difference. At ₹1 Cr+ salary, this becomes decisive.

Pensioners

Depends on pension level + other income. For pension-only income under ₹12L, new regime gives ₹0 tax via standard deduction + rebate. With substantial rental / capital gains, old regime might be better — but run both.

Legal basis — Section 16(ia) of the Income Tax Act

The standard deduction old vs new tax regime FY 2026-27 rules live in two places in the Income Tax Act 1961:

• Section 16(ia) — Standard deduction for salary income. Applies automatically to every salaried taxpayer and pensioner, flat amount, no proof. Currently ₹75,000 under the new regime / ₹50,000 under the old regime for FY 2026-27 (post Budget 2024 and confirmed in Budget 2025).
• Section 57(iia) — Deduction from family pension (received on death of the employee by the family member). ⅓ of family pension or ₹25,000 (new regime) / ₹15,000 (old regime), whichever is less. Budget 2024 raised the cap from ₹15,000 to ₹25,000 under the new regime.
• Section 115BAC — The statutory basis for the new tax regime itself. Sub-section (1A) fixed the ₹75,000 standard deduction under the new regime from FY 2024-25 onwards (Budget 2024 amendment). FY 2026-27 continues under this unchanged.

The CBDT Circular 8/2024 (dated 22 December 2024) reiterated the ₹75,000 / ₹50,000 standard deduction split for TDS on salary computation, so employers default to the new regime unless the employee explicitly opts for the old regime via Form 10-IEA. This default switch is the primary driver of the standard deduction old vs new tax regime FY 2026-27 comparison becoming the most-googled Indian tax query.

How to claim standard deduction (step-by-step)

1. No action at employer side — TDS computation auto-applies standard deduction based on regime chosen. ₹75K under new regime (default); ₹50K under old regime (requires Form 10-IEA declaration to payroll by January each year).
2. In ITR filing: ITR-1 Schedule “Income from Salary” → “Allowance not exempt” → applies standard deduction automatically if you check “salaried employee”. The portal pre-fills the correct amount based on the regime you’ve selected at Part A General.
3. Pensioner in ITR: report pension under “Income from Salary” (not Other Sources) so standard deduction applies. A common error — reporting pension under Other Sources — forfeits the entire ₹75,000 / ₹50,000 deduction.
4. Family pensioner: report under “Income from Other Sources” with the ₹25,000 (new regime) / ₹15,000 (old regime) Section 57(iia) deduction. Attach death certificate of the employee for first-time filers.
5. Multiple employers in the year: standard deduction is a one-time annual deduction, not per-employer. Consolidate gross salary from all Form 16s; standard deduction applies once (₹75K / ₹50K).

Quick facts — standard deduction FY 2026-27 India

Amount (new regime):

₹75,000 (Section 16(ia), via Section 115BAC(1A))

Amount (old regime):

₹50,000 (Section 16(ia))

Family pension (new / old):

₹25,000 / ₹15,000 (Section 57(iia))

Who qualifies:

Salaried employees, pensioners (former employer pension)

Who does NOT qualify:

Self-employed, business owners, consultants, capital-gains-only earners

Proof required:

None. Flat, automatic, in-built in ITR utility

Zero-tax salary ceiling (new regime):

₹12,75,000 gross (= ₹12L taxable + ₹75K standard deduction)

Zero-tax salary ceiling (old regime):

~₹8L gross (needs full 80C + 24b to reach ₹5L taxable rebate)

Budget 2024 change:

Raised from ₹50,000 to ₹75,000 under the new regime (July 2024)

Budget 2025 change:

No change. ₹75K / ₹50K split continues into FY 2026-27

Statutory reference:

Section 16(ia) of Income Tax Act 1961; Section 115BAC(1A) for new regime

Sources & citations

• Income Tax Act 1961, Section 16(ia) — standard deduction from salary (incometaxindia.gov.in)
• Income Tax Act 1961, Section 57(iia) — deduction from family pension
• Income Tax Act 1961, Section 115BAC — new tax regime default (introduced Finance Act 2020; amended Finance Act 2024)
• Finance (No. 2) Act 2024 — raised new-regime standard deduction ₹50K → ₹75K
• CBDT Circular 8/2024 (22 December 2024) — TDS on salary computation for FY 2024-25 / AY 2025-26
• Income Tax Department e-filing portal (incometax.gov.in) — ITR-1 / ITR-2 utility with pre-filled standard deduction
• Union Budget speeches of 2018, 2019, 2020, 2023, 2024 — standard deduction evolution

Bottom line — standard deduction old vs new tax regime FY 2026-27 India

Standard deduction old vs new tax regime FY 2026-27 India: ₹75,000 under the new regime, ₹50,000 under the old regime. Section 16(ia) of the Income Tax Act governs both. The ₹25,000 gap alone is why the new regime has become the default for most salaried employees — combined with the ₹12L rebate under Section 87A, it stretches the zero-tax threshold to ₹12.75 lakh for FY 2026-27. For employees with substantial home loan + HRA + 80C combined deductions above ~₹4.5 lakh, the old regime can still win; everyone else should default to new.

Run your specific salary + deduction profile through our Income Tax Calculator — it auto-applies the correct standard deduction for each regime and shows the exact tax difference. For CTC → in-hand salary breakdown with regime selection, use our Salary Calculator. For HRA exemption under the old regime, see our HRA Exemption Calculator. For the full regime comparison with budget context, read our new vs old tax regime FY 2026-27 guide.