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.
The government has amended the Income Tax Act, 1961 to clarify the position about 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. This bill was passed in Parliament. It is expected to come into force from April 1 next year.
Standard deduction benefits only employed people
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. However, it is still Rs 50,000 in the old regime. Standard deduction reduces the tax liability of the employee. The government had inserted 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 on social media about the amendment
Finance Minister Nirmala Sitharaman has posted about this on the social media platform X. She has said in this 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. This amendment states that some special deductions have to be made before calculating the income coming under ‘salary’.
The amendment was also included 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 the 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 thousand, 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 also clear now
In this amendment, the confusion regarding deduction regarding Unified Pension Scheme (UPS) has been eliminated. 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 the Income Tax Act, 1961 came into force from April 1, 1962.
