In Budget 2025, Finance Minister Nirmala Sitharaman has retained the benefit of standard deduction in both old and new tax systems for employees and pensioners who get salary. However, there were speculations that the government could increase it to give relief to the middle class, but it did not happen.
Explain that standard deduction is a fixed amount, which is reduced by taxable salary income. This provides the benefit of cutting their income to taxpayers, and there is no need to give any documents or evidence for this.
For example, if a person has an annual taxable income of Rs 10,00,000 and gets a standard deduction of Rs 75,000, his taxable income will be reduced to Rs 9,25,000.
What is standard deduction in old and new tax systems?
In the new tax system, salaried and pensioners will get a standard deduction of Rs 75,000. Because of this, the tax -free income limit has increased to Rs 12.75 lakh with a new tax -free limit of Rs 12 lakh declared in the budget.
Standard deduction in the old tax system will be Rs 50,000 as before. However, in this system, taxpayers will continue to get the benefit of other deductions like Section 80C (exemption of up to Rs 1.5 lakh), Section 80D (exemption on health insurance), and HRA (House Rent Allowance).
Why did the standard deduction not increase in budget 2025?
Many experts had hoped that the government could increase it, but the Finance Minister only repeated the current limit, not made any changes in it. On this, Kunal Sawani, partner of the legal firm Cyril Amarchand Mangaldas, says, “There was a lot of speculation about increasing standard deduction in the budget 2025, but it was not extended. The Finance Minister has only clarified the current boundary, no new increase has been made. ”
Similarly, Rajarshi Dasgupta, Executive Director of Legal Advisory Company Aquilaw, said, “In Budget 2025, Finance Minister Nirmala Sitharaman has retained the benefit of standard deduction in both old and new tax systems. In the new tax system, salaried people and pensioners will get a discount of Rs 75,000. ”
When was the standard deduction last extended?
From the financial year 2024-25, the standard deduction in the new tax system was increased from Rs 50,000 to Rs 75,000. However, it still remains Rs 50,000 in the old tax system. In addition, this limit has been increased from Rs 15,000 to Rs 25,000 for family pensioners.
In the budget 2025, the limit of standard deduction has been kept as it is. The new tax system will get the benefit of Rs 75,000 and Rs 50,000 in the old tax system. However, it has been increased to Rs 25,000 for family pensioners.