Standard Deduction from Salary 2026-27: Rs 75,000 or Rs 50,000? (Income Tax Act 2025, Section 19)

Section 19 of the Income-tax Act, 2025 lists every deduction allowed from salary income. The standard deduction is Rs 75,000 or the salary, whichever is less, when tax is computed under the default regime of section 202(1). In any other case it is Rs 50,000 or the salary, whichever is less. The same section also covers tax on employment, gratuity, pension commutation, retrenchment compensation, voluntary retirement and leave salary.

Everything below is taken from the Act as amended by the Finance Act, 2026 and the Income-tax Rules, 2026, and applies to tax year 2026-27 (1 April 2026 to 31 March 2027). A "tax year" is simply the year in which income is earned and taxed. This is information, not tax advice.

What is the standard deduction under the Income Tax Act 2025?

It is a flat deduction from your salary, allowed without any bills or proof. It sits at Sl. No. 2 of the Table in section 19(1). The amount depends on how your tax is computed:

How tax is computed	Standard deduction (Sl. No. 2)
Under section 202(1), the default regime with the slab Table	Rs 75,000 or the salary, whichever is less (clause (a))
In any other case, for example where a person has opted out of section 202(1) under section 202(4)	Rs 50,000 or the salary, whichever is less (clause (b))

"Whichever is less" matters for small salaries. Someone whose whole salary is Rs 60,000 for the year gets a deduction of Rs 60,000, not Rs 75,000.

Is the standard deduction allowed in the default regime?

Yes. Section 202(2)(a) lists what is disallowed when tax is computed under section 202(1). From section 19, it names only section 19(1), Table Sl. No. 1 (tax on employment). The standard deduction at Sl. No. 2 is not in that list, and clause (a) of Sl. No. 2 gives it the higher Rs 75,000 amount for exactly this case.

Is professional tax deductible from salary?

Sl. No. 1 allows the entire amount paid as tax on employment under article 276(2) of the Constitution (commonly called professional tax). But if your tax is computed under section 202(1), section 202(2)(a)(iv) says this deduction is not allowed. So it helps only where the default regime is not used.

Worked example 1: standard deduction in the default regime

Assumptions: Ravi earns a salary of Rs 12,00,000 for tax year 2026-27 and pays Rs 2,400 of professional tax. His tax is computed under section 202(1). No other salary deductions apply.

Step	Amount (Rs)
Salary	12,00,000
Less: standard deduction, lower of 75,000 and 12,00,000	75,000
Less: professional tax (Sl. No. 1), not allowed under section 202(2)(a)(iv)	0
Income under the head Salaries	11,25,000

The 11,25,000 is then combined with his other income to reach total income, and the slab Table in section 202(1) is applied.

Worked example 2: where section 202(1) is not used

Assumptions: Meena earns Rs 9,00,000 of salary in tax year 2026-27, pays Rs 2,500 of professional tax, and has opted out of section 202(1) under section 202(4). Sl. No. 2(b) therefore applies.

Step	Amount (Rs)
Salary	9,00,000
Less: standard deduction, lower of 50,000 and 9,00,000 (Sl. No. 2(b))	50,000
Less: professional tax (Sl. No. 1, entire amount)	2,500
Income under the head Salaries	8,47,500

Check: 9,00,000 - 50,000 = 8,50,000; 8,50,000 - 2,500 = 8,47,500.

What other deductions does section 19 allow from salary?

Besides Sl. Nos. 1 and 2, the Table covers lump-sum receipts at the end of a job. Here is the full list at a glance:

Sl. No.	Receipt	Deduction allowed
3	Death-cum-retirement gratuity of Central, State and similar government/local-authority employees (section 19(2)(g))	Entire amount
4	Retiring gratuity under the Pension Code or Regulations for defence services members	Entire amount
5	Gratuity under the Payment of Gratuity Act, 1972	Amount received, limited to the amount worked out under section 4(2) and (3) of that Act
6	Any other gratuity on retirement, incapacity before retirement, or termination	Least of actual gratuity, the amount notified by the Central Government, and half a month's salary for each completed year of service
7	Commuted pension under Civil Pensions (Commutation) Rules or similar government, all-India services, defence, State or local-authority schemes	Entire amount
8	Commuted pension from any other employer	Commuted value of one-third of the pension if gratuity was received, otherwise one-half of the pension
9	Commuted pension from a fund in Schedule VII (Table: Sl. No. 3)	Entire amount
10, 11	Retrenchment compensation to a workman	Least of compensation received, the section 25F(b) amount of the Industrial Disputes Act, 1947, and a notified amount (not less than Rs 50,000); full compensation under an approved scheme (Sl. No. 11)
12	Voluntary retirement or termination scheme payment	Lower of compensation received and Rs 5,00,000
13	Leave salary on retirement, Central or State Government employee	Entire amount
14	Leave salary on retirement, any other employee	Least of four limits (see below)

Where the Table refers to a limit "specified by the Central Government, by notification", the figure is not in the Act itself. Check the current notification before computing.

How is the gratuity deduction worked out for a private-sector employee?

Sl. No. 5 applies to employees covered by the Payment of Gratuity Act, 1972, and limits the deduction to the amount calculated under section 4(2) and (3) of that Act. The Income-tax Act refers to that Act without restating its formula.

Sl. No. 6 applies to other employees. The deduction is the least of three amounts: the actual gratuity, the notified Central Government limit, and half a month's salary for each completed year of service, using the average salary of the ten months before the event. Under section 19(2)(b), "salary" here means basic pay plus dearness allowance if the terms of employment provide for it. All other allowances and perquisites are left out.

Real-life example. Suresh retires from a small employer that is not covered by the Payment of Gratuity Act. He completed 12 years, his average salary over the last ten months (basic plus DA) was Rs 40,000, and the firm paid him Rs 3,00,000 as gratuity. Assume the notified Central Government limit is higher than Rs 3,00,000.

Step	Amount (Rs)
(a) Actual gratuity	3,00,000
(b) Notified limit (assumed higher)	not binding
(c) Half month's salary x 12 years = (40,000 / 2) x 12	2,40,000
Deduction, the least	2,40,000
Remaining 3,00,000 - 2,40,000 stays in his salary income	60,000

If gratuity is received from more than one employer in the same tax year, or was exempted in earlier years, section 19(2)(a) reduces the combined deduction to the notified limit (A) minus the amount already allowed earlier (B).

How much of a voluntary retirement (VRS) payment is deductible?

Sl. No. 12 allows the lower of the compensation received and Rs 5,00,000. Three conditions come with it:

• The scheme must be one of the kinds listed in section 19(2)(h) (public sector companies, other companies, authorities, local authorities, co-operative societies, universities, IITs, the Central or a State Government and notified institutions).
• The scheme must meet the requirements of rule 20(2): it applies to employees with ten years of service or age 40; it covers all employees except directors; it reduces overall staff strength; vacancies are not refilled; the employee is not re-employed by the same management; and the payment does not exceed 3 x N x S or M x S (N = completed years of service, M = months left before superannuation, S = salary at retirement, with dearness allowance included if the terms provide).
• Under section 19(2)(e)(ii), if the deduction is allowed in one tax year, it is not allowed in any other tax year. Under section 19(2)(e)(iii), an amount for which relief under section 157 was taken cannot also be deducted.

For employees of a public sector company under a voluntary separation scheme, rule 20(3) removes the ten-years-of-service or age-40 requirement.

Real-life example. Anil, a 55-year-old employee (superannuation at 60) of a public sector company with 25 years of service, takes a voluntary separation scheme and receives Rs 7,00,000. His salary at separation is Rs 50,000 a month and 60 months remain to superannuation. Assume the scheme meets every other requirement of rule 20.

Step	Amount (Rs)
Rule 20(2)(vi) limit A = 3 x N x S = 3 x 25 x 50,000	37,50,000
Rule 20(2)(vi) limit B = M x S = 60 x 50,000	30,00,000
Payment of 7,00,000 does not exceed A or B, so the scheme condition is met	-
Deduction = lower of 7,00,000 and 5,00,000 (Sl. No. 12)	5,00,000
Remaining amount stays in salary income	2,00,000

What is the deduction for leave salary on retirement?

Government employees (Central or State) get the entire amount under Sl. No. 13. For everyone else, Sl. No. 14 allows the least of four amounts:

The earned leave entitlement counted in (a) cannot exceed 30 days for every year of actual service, and "salary" includes dearness allowance only if the terms of employment so provide (section 19(2)(b)). Section 19(2)(f) applies the same "limit minus earlier deductions" rule as for gratuity.

Real-life example. Priya retires from a private company. Her average monthly salary over the last ten months was Rs 45,000, the cash value of her leave at credit (within the 30-days-a-year cap) is Rs 4,00,000, and the company pays her Rs 3,80,000. Assume the notified amount is higher than all of these.

Limit	Amount (Rs)
(a) Cash value of leave at credit	4,00,000
(b) 10 x 45,000	4,50,000
(c) Notified amount (assumed higher)	not binding
(d) Actual payment received	3,80,000
Deduction, the least	3,80,000

What about retrenchment compensation and commuted pension?

A workman's retrenchment compensation (Sl. No. 10) is deductible up to the least of the compensation received, the amount calculated under section 25F(b) of the Industrial Disputes Act, 1947, and a Central Government notified amount that is not less than Rs 50,000. Under section 19(2)(c), compensation on closure of an undertaking, or on transfer of ownership or management in specified circumstances, is treated as retrenchment compensation. "Workman" and "employer" carry their Industrial Disputes Act meanings (section 19(2)(d)).

Commuted pension (taking a lump sum instead of monthly pension) is fully deductible for the government and similar schemes in Sl. No. 7 and for Schedule VII funds in Sl. No. 9. For any other employer, Sl. No. 8 uses an actuarial commuted value of one-third of the pension where gratuity was received, or one-half otherwise.

Do pensioners, former employees and partners get the standard deduction?

Pensioners do. Section 16(b) says "salary" includes any annuity or pension, and section 15(2) says "employer" includes a former employer. A pension paid by a past employer is therefore income under the head Salaries, and the Sl. No. 2 standard deduction applies to it in the same way, limited to the pension itself if that is below Rs 75,000 or Rs 50,000. No bills or certificates are needed, because the Table asks for none.

Two receipts look similar but are treated differently:

• Family pension (the regular monthly amount a family member receives after the employee's death) is not salary. It is taxed under Income from other sources, and section 93(1)(d) gives its own deduction: one-third of the income or Rs 25,000, whichever is less, under section 202(1); and one-third or Rs 15,000, whichever is less, in any other case.
• A partner's salary or remuneration from a firm is not "salary" for this purpose (section 15(4)), so section 19 deductions, including the standard deduction, do not apply to it.

Real-life example. Kavita's husband, a government employee, passed away and she receives a family pension of Rs 30,000 a month, Rs 3,60,000 for tax year 2026-27, under section 202(1). One-third is Rs 1,20,000, which is above the Rs 25,000 cap, so her deduction is Rs 25,000 and Rs 3,35,000 stays taxable. Her own pension from a previous job, if she had one, would be a separate salary receipt eligible for the Sl. No. 2 deduction.

Common mistakes

• Using Rs 75,000 in every case. The Rs 75,000 figure belongs to Sl. No. 2(a), that is, computation under section 202(1). In any other case it is Rs 50,000 (Sl. No. 2(b)).
• Forgetting the "whichever is less" limit. The standard deduction cannot exceed the salary itself.
• Claiming professional tax under the default regime. Section 202(2)(a)(iv) disallows Sl. No. 1 when tax is computed under section 202(1).
• Treating gratuity salary as total pay. For Sl. Nos. 6 and 14, "salary" is basic plus dearness allowance (if the terms provide), without other allowances or perquisites.
• Claiming the VRS deduction twice. Section 19(2)(e)(ii) allows it in one tax year only, and the scheme must meet rule 20.
• Applying the standard deduction to family pension or a partner's remuneration. Family pension has its own deduction under section 93(1)(d), and a partner's remuneration is outside "salary" under section 15(4).
• Ignoring the notified limits. Sl. Nos. 6, 10 and 14 refer to Central Government notifications. The Act does not state those figures.

Quick reference

Item	Limit	Source
Standard deduction, section 202(1) regime	Rs 75,000 or salary, if less	Section 19(1), Sl. No. 2(a)
Standard deduction, any other case	Rs 50,000 or salary, if less	Section 19(1), Sl. No. 2(b)
VRS / voluntary separation	Rs 5,00,000 or amount received, if less	Sl. No. 12, rule 20
Retrenchment compensation floor for the notified amount	Not less than Rs 50,000	Sl. No. 10(c)
Leave counted per year of service	30 days	Sl. No. 14(a)
Leave salary multiple	10 x average monthly salary	Sl. No. 14(b)

How does this fit with the rest of the Act?

Salary is one of the heads of income, and these deductions only reduce income under that head. For how the heads and total income fit together, read our guide to the scope of total income under the Income-tax Act, 2025.

For a CA firm, the difficulty is not the arithmetic but tracking which clients are salaried, which regime each has chosen, and which have a retirement or VRS payment this year that needs a notified-limit check. Finexo's practice management software keeps client records, tasks and deadlines in one place so those checks do not depend on memory. It does not compute tax for you.

Where this is in the Act

• Section 19(1), Table Sl. Nos. 1 to 14: deductions from salary
• Section 19(2)(a) to (h): aggregate limits, meaning of salary, retrenchment, VRS conditions, schemes covered
• Section 202(1) and 202(2)(a)(iv): default regime and the disallowance of Sl. No. 1
• Section 202(4): option to opt out of section 202(1)
• Section 157: relief when salary is paid in arrears or in advance (cross-referenced in section 19(2)(e)(iii))
• Rule 20 of the Income-tax Rules, 2026: procedure and conditions for VRS and voluntary separation