Standard Deduction: Only employed people get the benefit of standard deduction. Earlier, the standard deduction was Rs 50,000 in both the new and old regimes of income tax. In the Union Budget 2024, the government had increased it to Rs 75,000 in the new regime.
Standard Deduction: The government has amended the Income Tax Act, 1961 to clarify the position regarding the standard deduction of Rs 75,000 in the new regime. The government had announced in the Union Budget 2024 to increase the standard deduction from Rs 50,000 to Rs 75,000 in the new regime. This clarification has also been included in the Income Tax Bill, 2025. The bill has been passed in Parliament. It is expected to come into force from April 1 next year.
Only employed people can avail the benefit of standard deduction
It is important to keep in mind that the benefit of standard deduction is available only to employed people. Earlier, the standard deduction was Rs 50,000 in both the new and old regimes of income tax. In the Union Budget 2024, the government increased it to Rs 75,000 in the new regime. But, it is still Rs 50,000 in the old regime. Standard deduction reduces the tax liability of the employee. The government had added a new provision in section 16(ia) of the Finance (No 2) Act, 2024 to increase the standard deduction to Rs 75,000 in the new regime.
Finance Minister posted about the amendment on social media
Finance Minister Nirmala Sitharaman has posted about this on the social media platform X. She has said in it that apart from the new Income Tax Bill, we are making some special amendments in the Income Tax Act, 1961. Its purpose is to clarify the situation about the new regime of income tax. In this amendment, it has been said that some special deductions will have to be made before calculating the income coming under ‘salary’.
The amendment was also incorporated in the Income Tax Bill, 2025
Under the new provision included in section 16(ia), a deduction of Rs 50,000 will have to be made. If income tax is calculated under clause (ii) of sub-section (1O) of section 115BAC, then the provision of this clause will be the same as for Rs 50,000, but instead of this, the option of Rs 75,000 will be used. This change has also been incorporated in the Income Tax Bill, 2025.
The situation regarding deduction in UPS is now clear
In this amendment, the confusion regarding deduction for Unified Pension Scheme (UPS) has been removed. After this, it has become clear that the same tax benefits will be available in UPS as are available in National Pension System (NPS). The Income Tax Bill, 2025 is expected to come into force from April 1 next year. It will replace the Income Tax Act, 1961. The rules of Income Tax Act, 1961 came into force from April 1, 1962.
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