Does New Regime Allow Standard Deduction in 2025? Explained
- Dipali Waghmode
- Sep 16
- 8 min read
Updated: Sep 19
The standard deduction is a key component of the Income Tax system designed to provide salaried individuals and pensioners with a fixed deduction from their taxable income. For the financial year 2024-25 (Assessment Year 2025-26), the standard deduction continues to simplify tax calculations, especially under the new tax regime introduced in recent years. While the new tax regime offers lower tax rates, it allows limited deductions and exemptions compared to the old regime. Understanding how the standard deduction works under this regime is crucial for optimizing tax savings. It ensures that taxpayers can reduce their taxable income effectively, claim benefits correctly, and avoid errors while filing their Income Tax Returns (ITR). Platforms like TaxBuddy can simplify this process by guiding taxpayers through deductions, helping with accurate calculations, and ensuring compliance with all latest rules and updates.
Table of Contents
Why TaxBuddy Helps with New Regime Filing
Standard Deduction Under the New Tax Regime (2025)
For the Financial Year (FY) 2024-25, salaried individuals and pensioners are eligible for a standard deduction of ₹75,000 under the new tax regime. This is an increase from previous years and reflects the government’s ongoing efforts to simplify taxation and provide immediate relief to taxpayers. The standard deduction is automatically applied to salary or pension income, reducing the taxable income without requiring submission of additional proofs, receipts, or investment documents. Unlike other deductions, it is straightforward and available to all eligible taxpayers under the new tax regime. This makes it an effective tool for lowering tax liability while reducing the paperwork typically associated with claiming multiple exemptions or deductions.
How Standard Deduction Works in the New Regime
The standard deduction directly reduces the total taxable income. For instance, if a salaried employee earns ₹10,00,000 annually, applying the ₹75,000 standard deduction brings the taxable income down to ₹9,25,000. This reduction applies both to regular salary and pension income. It works independently of other deductions or exemptions, meaning taxpayers do not need to invest in tax-saving instruments or provide expense proofs to claim it.
This deduction simplifies the tax computation process by providing immediate relief at the source of income calculation, helping taxpayers lower their overall tax burden. It also ensures that salaried employees and pensioners benefit without going through complex tax planning, making the process transparent and accessible.
Official Clarifications and Legislative Updates
The Ministry of Finance, along with the Central Board of Direct Taxes (CBDT), has issued official clarifications regarding the applicability of the standard deduction for salaried taxpayers and pensioners for the Financial Year 2024-25. According to these updates, the standard deduction continues to be allowed under the new tax regime. For FY 2024-25, the standard deduction amount has been increased to ₹75,000, which can be claimed by all eligible salaried individuals and pensioners without the need for additional exemptions on salary components.
Legislative notifications explicitly state that this deduction is applied before calculating other exemptions and deductions, ensuring compliance with updated income tax rules. The clarity provided by these notifications eliminates confusion around salary exemptions such as House Rent Allowance (HRA), transport allowance, or medical reimbursement for taxpayers who opt for the standard deduction under the new tax regime.
Platforms like TaxBuddy simplify this process significantly. When filing the Income Tax Return (ITR) using TaxBuddy, the standard deduction is automatically incorporated in the computation of taxable income, reducing errors and ensuring that taxpayers claim their full eligible deduction. This automation also helps prevent discrepancies that may arise from manual calculations, ultimately streamlining the filing process and supporting faster processing of refunds.
Is Standard Deduction Allowed in New Tax Regime?
Yes, the standard deduction is fully allowed under the new tax regime. Taxpayers do not need to individually claim multiple exemptions for components of salary, as the deduction is automatically applied in the ITR computation. This means that HRA, conveyance allowance, and medical reimbursement do not need separate consideration if the taxpayer opts for the standard deduction. By using platforms like TaxBuddy, salaried taxpayers and pensioners can ensure accurate application of this ₹75,000 deduction, avoid manual errors, and enjoy a seamless filing experience.
Benefits of Standard Deduction in 2025
The standard deduction is a fixed amount allowed as a deduction from taxable income, aimed at reducing the overall tax liability for salaried employees and pensioners. For the Financial Year (FY) 2024-25, the standard deduction has been increased to ₹75,000, providing significant immediate relief for taxpayers under the new tax regime.
One of the key advantages is the immediate reduction in taxable income. For example, if a salaried individual earns ₹10,00,000 in FY 2024-25, the standard deduction reduces the taxable portion to ₹9,25,000, lowering the overall income tax liability without requiring any additional paperwork.
Another benefit is the simplified filing process. Unlike other deductions that may require detailed proofs, invoices, or investment documentation, the standard deduction is automatically applied, making tax filing faster and more convenient.
This deduction also helps achieve a lower tax burden, particularly for salaried employees and pensioners, by reducing the effective taxable income, which can place them in a lower tax slab or reduce the overall tax payable.
Finally, the standard deduction is compatible with other eligible deductions under the new regime, allowing taxpayers to combine it with deductions such as NPS contributions or home loan interest, optimizing tax planning while maintaining compliance.
How to Claim Standard DeductionWhile Filing ITR
The standard deduction is a fixed amount allowed to salaried employees and pensioners to reduce taxable income, simplifying tax calculations and providing automatic relief without the need for additional documentation. For the Financial Year 2024–25, the standard deduction amount is set at ₹75,000. While filing your Income Tax Return (ITR), this deduction is applied against your total salary or pension income, effectively lowering the taxable income and, consequently, the overall tax liability.
Most updated ITR utilities, including those provided by the Income Tax Department, automatically calculate and apply the standard deduction when taxpayers enter their salary or pension details. This ensures that you benefit from the deduction without manually calculating it, reducing the chances of errors that could trigger notices or queries from the Income Tax Department.
Platforms like TaxBuddy further enhance this process by offering both self-filing and expert-assisted plans. They ensure that the standard deduction is accurately applied, guiding users step by step through salary and pension entry sections, and verifying all details before submission. This seamless integration reduces mistakes, helps maintain compliance, and saves valuable time during filing. TaxBuddy also provides alerts and checks for other deductions and exemptions, ensuring a comprehensive, error-free filing experience. By using such platforms, taxpayers can confidently claim the ₹75,000 standard deduction, maximize tax savings, and avoid unnecessary scrutiny or corrections later.
Practical Example: Standard Deduction in Action
Let’s take the example of a salaried individual earning an annual gross salary of ₹12,00,000. Under the new tax regime for FY 2024–25, a standard deduction of ₹75,000 is available for salaried employees. This deduction is automatically applied to reduce taxable income, helping taxpayers lower their overall tax liability without the need for submitting proofs for specific expenses like commuting or medical allowances.
Step 1: Calculate Taxable Income The taxable income is computed by subtracting the standard deduction from the gross salary:
Gross Salary: ₹12,00,000 Standard Deduction: ₹75,000 Taxable Income = 12,00,000 – 75,000 = ₹11,25,000
Step 2: Apply Tax Slabs The new tax regime has defined slabs for FY 2024–25 as follows:
Income up to ₹3,00,000: Nil
₹3,00,001 – ₹6,00,000: 5%
₹6,00,001 – ₹9,00,000: 10%
₹9,00,001 – ₹12,00,000: 15%
Using these slabs, tax is calculated step by step:
₹0 – ₹3,00,000 → Nil
₹3,00,001 – ₹6,00,000 → 5% of ₹3,00,000 = ₹15,000
₹6,00,001 – ₹9,00,000 → 10% of ₹3,00,000 = ₹30,000
₹9,00,001 – ₹11,25,000 → 15% of ₹2,25,000 = ₹33,750
Step 3: Total Tax Liability Total Tax = ₹15,000 + ₹30,000 + ₹33,750 = ₹78,750
This practical example clearly shows that the standard deduction of ₹75,000 directly reduces the taxable income from ₹12,00,000 to ₹11,25,000, leading to lower tax liability. Without the standard deduction, the tax payable would have been significantly higher.
The standard deduction, therefore, provides immediate financial relief to salaried taxpayers, reducing the burden of income tax in a simple, straightforward way, without requiring any detailed documentation or proofs.
Why TaxBuddy Helps with New Regime Filing
Filing under the new tax regime for FY 2024-25 can be challenging due to revised rules, updated income tax slabs, and the specific deductions allowed. TaxBuddy simplifies this process by automatically calculating taxes according to the latest regulations, ensuring that standard deductions, such as the revised ₹75,000 deduction for salaried individuals, are applied correctly. The platform also identifies other eligible deductions and exemptions available under the new regime, such as contributions to the National Pension Scheme (NPS) or employer-provided allowances, making it easier for taxpayers to maximize their benefits.
Whether opting for self-filing or expert-assisted plans, TaxBuddy guides users step by step, ensuring that all details are accurately entered, reducing the likelihood of mistakes that could trigger notices from the Income Tax Department. Additionally, the platform provides clear summaries, digital validation, and instant calculations, saving time and effort. By using TaxBuddy, taxpayers experience a seamless, efficient, and fully compliant filing process, tailored to the latest rules of the new tax regime.
Conclusion
The standard deduction under the new tax regime is a straightforward, beneficial feature that reduces taxable income for salaried individuals and pensioners. It provides immediate tax relief and simplifies the ITR filing process. For anyone looking for assistance in tax filing, it is highly recommended todownload the TaxBuddy mobile app for a simplified, secure, and hassle-free experience.
FAQs
Q1. What is the standard deduction under the new tax regime for FY 2024-25? For salaried individuals and pensioners, the standard deduction under the new tax regime for FY 2024-25 is ₹75,000. This deduction is applied automatically to reduce taxable income and helps lower your overall tax liability without the need for additional documentation.
Q2. Is the standard deduction available for pensioners? Yes, pensioners are eligible for the standard deduction under the new tax regime. This deduction is automatically considered while calculating taxable pension income, ensuring that retirees also benefit from reduced tax liability.
Q3. Do I need to submit documents to claim the standard deduction? No, documents are not required to claim the standard deduction. It is automatically applied in your Income Tax Return based on your salary or pension income, simplifying the filing process for taxpayers.
Q4. Can the standard deduction be claimed along with other deductions? Yes, the standard deduction is applied first when calculating taxable income. After this, taxpayers can claim other eligible deductions under the new tax regime, such as NPS contributions or certain exemptions, maximising tax savings.
Q5. Does TaxBuddy automatically apply the standard deduction? Yes, whether you choose self-filing or expert-assisted filing with TaxBuddy, the standard deduction is applied automatically. The platform ensures accurate calculations, reducing the risk of errors that could lead to notices from the Income Tax Department.
Q6. How does the standard deduction reduce tax liability? The standard deduction lowers taxable income directly. For example, if your salary is ₹10,00,000, claiming a ₹75,000 standard deduction reduces taxable income to ₹9,25,000, which in turn reduces the total tax payable.
Q7. Is the standard deduction applicable to all salaried employees? Yes, all salaried employees, including pensioners under the new tax regime, are eligible. There are no special conditions or requirements to claim this deduction; it is automatically applied by ITR utilities or tax filing platforms.
Q8. Can filing errors affect claiming the standard deduction? Yes, errors in filing, such as incorrect salary entries or missing income details, can affect the application of the standard deduction. Using platforms like TaxBuddy ensures accurate filing and reduces the risk of errors that could trigger notices or corrections.
Q9. Is the deduction applied automatically in ITR utilities? Yes, updated ITR utilities for FY 2024-25 automatically reflect the standard deduction when calculating taxable income. This ensures that taxpayers benefit from the deduction without having to manually enter or claim it.
Q10. Does missing the standard deduction affect refund processing? Yes, if the standard deduction is not applied correctly due to filing errors, it can lead to discrepancies in taxable income, which may delay refund processing. Accurate filing ensures smoother processing and timely receipt of refunds.
Q11. Can I opt for the old regime if I want different exemptions? Yes, taxpayers have the option to choose between the old and new tax regimes. If the old regime with other exemptions and deductions provides greater tax benefits, you can select it while filing your ITR.
Q12. Where can I get assistance for claiming the standard deduction? Platforms like TaxBuddy provide expert guidance and automated filing to ensure the standard deduction is correctly applied. The platform offers both self-filing and assisted plans, helping taxpayers file their ITR efficiently and accurately.
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