Relief for salaried employees: Govt amends tax law for clarity on ₹75,000 Standard Deduction

The Government has amended the Income Tax Act, 1961, to provide clarity on the standard deduction of ₹75,000 under the new tax regime for salaried employees. This change has also been incorporated in the New Income Tax Bill 2025.

"In addition to the New Income Tax Bill, we are bringing certain amendments in the Income Tax Act of 1961... Providing clarity for the new Income Tax regime, where standard deduction of ₹75,000 will be clarified for salaried individuals," Finance Minister Nirmala Sitharaman said on X.

A standard deduction of ₹75,000 was announced in the new tax regime for salaried employees in the Union Budget 2024.

What's the change now?

Through The Taxation Laws (Amendment) Bill, 2025, the Government has clarified that the income chargeable to tax under the head "Salaries" shall be computed after a standard deduction of ₹50,000 under the old tax regime and ₹75,000 under the new tax regime.

The amendment says:

"In the Income-tax Act, in section 16, in clause (ia), in the proviso, after the word, brackets and figures “clause (ii)”, the words, brackets and figures “or clause (iii)” shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 2025."

Based on the amendment, Section 16 of the Income Tax 1961, now reads as follows:

The income chargeable under the head “Salaries” shall be computed after making the following deductions, namely: -

(ia) a deduction of fifty thousand rupees or the amount of the salary, whichever is less

[Provided that in a case where income-tax is computed under clause (ii) or clause (iii) of sub-section (1A) of section 115BAC, the provisions of this clause shall have effect as if for the words "fifty thousand rupees", the words "seventy-five thousand rupees" had been substituted;]

The Taxation Laws (Amendment) Bill, 2025, and the Income Tax Bill 2025 have been approved by the Parliament.