The Government has formally clarified that salaried employees opting for the new income tax regime will be entitled to a standard deduction of Rs 75,000 from April 1, 2026, under the New Income Tax Bill, 2025. The clarification, also incorporated into the existing Income Tax Act, 1961, aims to remove ambiguity and streamline salary-related tax calculations.
Finance Minister Nirmala Sitharaman announced on X that the amendment would "bring clarity to the new income tax regime" and ensure uniform application of the Rs 75,000 deduction for salaried individuals. The move follows the enhancement of the standard deduction from Rs 50,000 to Rs 75,000 in the Union Budget 2024 via the Finance (No. 2) Act, 2024, through a proviso to Section 16(ia) of the Act.
What Has Changed?
The Taxation Laws (Amendment) Bill, 2025, now explicitly states that:
- Under the old tax regime, the standard deduction remains at Rs 50,000 or the amount of salary, whichever is lower.
- Under the new tax regime, as per Section 115BAC, the deduction is Rs 75,000 or the amount of salary, whichever is lower.
This provision will apply from FY 2026-27 onwards.
Pension Scheme Clarifications
The amendment also addresses another long-standing ambiguity aligning tax benefits for contributions to the Unified Pension Scheme (UPS) with those for the National Pension System (NPS). This change ensures that both retirement savings options receive equal tax treatment.
Revised Tax Slabs Under the New Regime
As per Clause 202(I) of the New Income Tax Bill, 2025, the following slab rates will apply to individuals, Hindu Undivided Families (HUFs), Associations of Persons, Bodies of Individuals, and artificial juridical persons:
| Total Income (Rs) | Rate of Tax |
|---|---|
| Up to 4,00,000 | Nil |
| 4,00,001 - 8,00,000 | 5% |
| 8,00,001 - 12,00,000 | 10% |
| 12,00,001 - 16,00,000 | 15% |
| 16,00,001 - 20,00,000 | 20% |
| 20,00,001 - 24,00,000 | 25% |
| Above 24,00,000 | 30% |
The old tax regime's slab structure remains unchanged and will continue to be specified annually in the Union Budget.
A Step Toward Simpler Compliance
The New Income Tax Bill, 2025, passed by Parliament earlier this week, aims to replace the six-decade-old Income Tax Act, 1961, with a more concise, clearer framework. By explicitly defining standard deductions and aligning pension scheme benefits, the government seeks to make tax compliance easier and remove interpretation disputes.
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