Budget 2026: What Is Standard Deduction And How It Helps Taxpayers

Finance Minister Nirmala Sitharaman will present the Union Budget 2026 on February 1. The Budget may introduce measures to make taxes fairer, boost savings, and encourage wealth creation across asset classes, as per Ernst & Young. The Income Tax Act allows taxpayers to reduce their tax liability through deductions and rebates. One such option is the standard deduction, available to salaried individuals and pensioners to lower taxable income effortlessly.

What Is Standard Deduction?

The standard deduction is a fixed amount subtracted from a taxpayer's gross salary to reduce taxable income. Salaried individuals and pensioners can claim it automatically, without providing any investment proof or bills.

Example: If your yearly salary is Rs 12,00,000 and you are eligible for a Rs 75,000 standard deduction under the new tax regime, your taxable income reduces to Rs 11,25,000.

Originally introduced in the past, the standard deduction was removed for a few years and later re-introduced in the 2018 Budget to provide relief to taxpayers.

Standard Deduction Under Old And New Tax Regimes

Under the old tax regime, salaried taxpayers can claim a Rs 50,000 standard deduction, a benefit restored in 2018 after being withdrawn in FY 2005-06.

The new tax regime, which initially offered lower tax rates without deductions, began allowing a standard deduction in 2023. This was later increased to Rs 75,000 in 2024.

Who Is Eligible For Standard Deduction

The standard deduction is available to salaried individuals and pensioners. Self-employed individuals and Hindu Undivided Families (HUFs) are not eligible.

Benefits Of Standard Deduction

• Reduces Tax Liability - Since it directly reduces taxable income, it lowers the total tax payable.
• Simplifies Income Tax Return (ITR) Filing - No need to maintain bills or proofs to claim this deduction.
• Available To All Salaried Individuals - There are no conditions or restrictions to claim this deduction.

Documents Required

No supporting documents are needed to claim the standard deduction itself. While filing your income tax return, you will need basic documents such as:

• Bank statements for the financial year
• Salary slips and Form 16
• Income statements from interest or fixed deposits
• TDS certificates
• Investment documents (if claiming other deductions)
• Form 26AS and Form AIS

Purpose Of Standard Deduction

• Simplify tax filing - reduces paperwork and removes the need to show actual expenses.
• Provide tax relief - especially to middle-class salaried individuals.
• Extend benefits to pensioners - helping retired citizens save on taxes.