The bottom line first: the Rs. 75,000 standard deduction in the new tax regime is a flat, no-questions-asked subtraction from your salary or pension income — you do not spend a rupee or produce a single receipt to claim it. It is the reason the widely quoted “no tax up to Rs. 12.75 lakh” figure for salaried people is higher than the Rs. 12 lakh rebate ceiling everyone else works with. The extra Rs. 75,000 is exactly the standard deduction doing its job.
But the deduction is narrower than most people assume. It attaches to a specific head of income, not to a person. A salaried employee and a retired pensioner get the full Rs. 75,000; a family pensioner gets a different, smaller figure; and a freelancer or business owner earning the identical amount gets nothing under this head at all. This article sets out precisely who gets it, on what income, and how it stacks with the Rs. 12 lakh rebate to produce that Rs. 12.75 lakh tax-free salary.
What the standard deduction actually is
The standard deduction is a fixed amount the law lets you deduct from income taxable under the head “Salaries” — no proof, no conditions, no link to any expense you incurred. For FY 2025-26 (AY 2026-27) the amounts are:
| New regime | Old regime | |
| Salaried employees | Rs. 75,000 | Rs. 50,000 |
| Pensioners (regular pension) | Rs. 75,000 | Rs. 50,000 |
| Family pension (Section 57(iia)) | 1/3 of pension or Rs. 25,000, whichever is lower | 1/3 of pension or Rs. 15,000, whichever is lower |
| Business / professional income | Not available | Not available |
The Rs. 75,000 figure applies only in the new regime; the old regime still gives Rs. 50,000. Since the new regime is the default and is what most salaried people now use, Rs. 75,000 is the number that matters for the majority.
Who gets it — and on what income
Salaried employees
Any individual with income taxable under “Salaries” gets the full Rs. 75,000, regardless of how high the salary is. There is no upper income limit and no minimum — even if your gross salary is below Rs. 75,000 the deduction is capped at the salary itself, so it can never create a loss. It is allowed automatically; your employer already builds it into the monthly TDS calculation.
Pensioners drawing their own pension
Pension received by a retired employee from a former employer is taxed under the head “Salaries”, not “Other sources”. That single classification is what entitles pensioners to the same Rs. 75,000 standard deduction as a working employee. A retiree whose only income is a Rs. 6 lakh pension deducts Rs. 75,000 straight off the top, exactly as if it were salary.
Family pensioners — a different, smaller deduction
A family pension — paid to the spouse or dependant of a deceased employee — is taxed under “Income from Other Sources”, not “Salaries”. It therefore does not get the Rs. 75,000 standard deduction. Instead, Section 57(iia) gives a separate deduction of one-third of the family pension or Rs. 25,000, whichever is lower, in the new regime (Rs. 15,000 in the old regime). Confusing the two is a common filing error, so it is worth being clear: your own pension is “salary” and gets Rs. 75,000; a pension you receive because a family member passed away is “other sources” and gets the Rs. 25,000 family-pension deduction.
Business owners, professionals and freelancers
Because the standard deduction is tied to the salary head, anyone whose income is business or professional — a shopkeeper, a consultant billing under their own name, a freelancer, a partner drawing remuneration from a firm — cannot claim it. Their relief comes instead from deducting actual business expenses (or opting for presumptive taxation under Section 44AD/44ADA). This is the single biggest reason a salaried person and a self-employed person with the same total income pay different tax.
How it stacks with the Rs. 12 lakh rebate
Here is where the standard deduction earns its reputation. Under the new regime for FY 2025-26, the Section 87A rebate makes the tax nil for anyone whose taxable income is up to Rs. 12 lakh. A salaried person first knocks Rs. 75,000 off gross salary as standard deduction, and only what remains is “taxable income”. So a salaried employee can earn up to Rs. 12,75,000 gross, bring taxable income down to exactly Rs. 12 lakh, and pay zero tax.
| Salaried employee | Business / professional | |
| Total income | Rs. 12,75,000 | Rs. 12,75,000 |
| Less: standard deduction | Rs. 75,000 | Nil |
| Taxable income | Rs. 12,00,000 | Rs. 12,75,000 |
| Tax before rebate | Rs. 60,000 | Rs. 71,250 |
| Less: 87A rebate | Rs. 60,000 | Nil (income above Rs. 12 lakh) |
| Add: 4% cess | — | Rs. 2,850 |
| Tax payable | Nil | Rs. 74,100 |
Same Rs. 12,75,000 of income, and the salaried employee pays nothing while the professional pays Rs. 74,100 — entirely because the standard deduction pulls the employee’s taxable income to the Rs. 12 lakh rebate line. You can reproduce either column for your own figures with our Income Tax Calculator.
The marginal-relief cushion just above Rs. 12 lakh
What if taxable income creeps slightly past Rs. 12 lakh — say a salaried person earns Rs. 12,85,000, leaving Rs. 12,10,000 taxable after the deduction? The rebate is gone, but marginal relief steps in so the tax cannot exceed the amount by which income crosses Rs. 12 lakh. On Rs. 12,10,000 the normal tax is Rs. 61,500, yet the income is only Rs. 10,000 over the line, so marginal relief caps the tax at Rs. 10,000 (plus cess). This relief tapers off at roughly Rs. 12,70,000 of taxable income, after which you simply pay normal slab tax. The practical takeaway: the standard deduction and marginal relief together make the zone just above Rs. 12 lakh far gentler than the raw slab rates suggest.
Common mistakes to avoid
Do not claim Rs. 75,000 against business income — the return will be flagged. Do not apply the salaried Rs. 75,000 to a family pension; use the Rs. 25,000 Section 57(iia) figure instead. Do not double-count it across two Form 16s after a job change — the standard deduction is once per person per year, not once per employer. And remember it is Rs. 75,000 only in the new regime; if you consciously opt for the old regime for its other deductions, your standard deduction drops to Rs. 50,000. If your income mixes salary, pension and business, our team at Ask a CA — Income Tax & TDS can confirm exactly which deduction attaches to which stream.
Key takeaways
- The standard deduction is Rs. 75,000 in the new regime and Rs. 50,000 in the old — a flat, proof-free subtraction from salary or pension income.
- Salaried employees and retirees drawing their own pension both get the full Rs. 75,000; there is no income ceiling.
- Family pension is taxed under “other sources” and gets a separate, smaller deduction — Rs. 25,000 (new regime) or Rs. 15,000 (old) under Section 57(iia), not Rs. 75,000.
- Business owners, professionals and freelancers cannot claim the standard deduction at all; their relief is actual expenses or presumptive taxation.
- The Rs. 75,000 deduction plus the Rs. 12 lakh 87A rebate is what makes salary up to Rs. 12,75,000 completely tax-free in the new regime, with marginal relief cushioning income just above that.
Frequently Asked Questions
Is the Rs. 75,000 standard deduction available in both regimes?
No. The Rs. 75,000 figure applies only in the new regime for FY 2025-26. If you opt for the old regime, the standard deduction is Rs. 50,000. Both are available only against salary or pension income.
Can a pensioner claim the standard deduction?
Yes, if it is their own pension from a former employer — that pension is taxed as “salary”, so the full Rs. 75,000 (new regime) applies. A family pension received after the death of the earning member is different: it is taxed under “other sources” and gets only the Rs. 25,000 deduction under Section 57(iia).
I am a freelancer — do I get the Rs. 75,000 standard deduction?
No. The standard deduction is confined to the salary head, so business and professional income does not qualify. You reduce your tax instead by claiming genuine business expenses, or by using presumptive taxation under Section 44ADA if eligible.
How does the standard deduction make Rs. 12.75 lakh tax-free?
A salaried person deducts Rs. 75,000 from a gross salary of Rs. 12,75,000, leaving taxable income of exactly Rs. 12 lakh. The Section 87A rebate then wipes the tax on Rs. 12 lakh to zero, so the whole Rs. 12.75 lakh salary bears no tax in the new regime.
I had two employers this year — can I claim Rs. 75,000 twice?
No. The standard deduction is a single Rs. 75,000 per person for the year, not per employer. If each employer applied it separately, your combined return will show excess deductions and can trigger a tax demand; claim it once on your total salary.