Standard deduction
Also written Standard deduction (salary)
A flat deduction allowed without proof of expenses — Rs 50,000 (old regime) or Rs 75,000 (new regime) from salary, and 30% of net annual value from let-out house property.
In plain language
The phrase standard deduction appears twice in the workbook's income tax chapter, under two different heads of income, and meaning two different things. Both are flat deductions that require no proof of actual expenses — that is what "standard" means — but they are computed differently and must not be mixed up.
- From salary. A fixed amount deducted in computing income under the head Salary: Rs 50,000 under the old tax regime and Rs 75,000 under the new tax regime.
- From house property — Section 24(a). A deduction of 30% of the net annual value of a let-out or deemed let-out property, allowed in computing income from house property.
Neither depends on what the taxpayer actually spent.
How it works
Salary. The workbook's computation of salary income: basic salary, plus taxable allowances, perquisites, profit in lieu of salary, taxable retirement benefits and pension; less entertainment allowance, employment tax and standard deduction.
In its Mr B example (basic salary Rs 15,00,000, employer NPS contribution Rs 2,10,000 added):
| Old regime | New regime | |
|---|---|---|
| Gross salary | Rs 17,10,000 | Rs 17,10,000 |
| Less: standard deduction | (Rs 50,000) | (Rs 75,000) |
| Taxable salary | Rs 16,60,000 | Rs 16,35,000 |
House property. The computation for let-out and deemed let-out property:
| Step | |
|---|---|
| Annual value | A |
| Less: municipal taxes actually paid | B |
| Net annual value | C = A − B |
| Share in net annual value | D = C × share in property |
| Less: standard deduction, 30% of D | E |
| Less: interest on home loan (Section 24(b)) | F |
| Income from house property | D − E − F |
For a self-occupied property the annual value is nil, so there is nothing for the 30% to apply to.
The 30% is available regardless of what was spent on repairs or maintenance. In the workbook's Mr A example, rent of Rs 2,20,000 attracts a standard deduction of Rs 66,000, and with home loan interest of Rs 5,00,000 the income from house property is a loss of Rs 3,46,000.
A worked example
Illustrative figures.
Kavita is a salaried employee who also owns a flat she lets out.
Salary head. Gross salary Rs 12,00,000.
| Old regime | New regime | |
|---|---|---|
| Gross salary | Rs 12,00,000 | Rs 12,00,000 |
| Standard deduction | (Rs 50,000) | (Rs 75,000) |
| Income from salary | Rs 11,50,000 | Rs 11,25,000 |
House property head. Rent Rs 3,60,000 a year (equal to the reasonable expected rent); municipal taxes paid Rs 20,000; home loan interest Rs 1,50,000.
Annual value 3,60,000
Less: municipal taxes paid (20,000)
Net annual value 3,40,000
Less: standard deduction 30% (1,02,000)
Less: interest u/s 24(b) (1,50,000)
Income from house property 88,000
She spent Rs 40,000 on painting and repairs in the year. It does not appear anywhere: the 30% standard deduction of Rs 1,02,000 is what the law allows instead, whatever the actual spend.
The mix-up the exam wants. A candidate who applies Rs 75,000 to the rental income, or 30% to her salary, has mixed up the two provisions. And the 30% is on net annual value — applying it to the gross Rs 3,60,000 gives Rs 1,08,000, which is wrong by Rs 6,000.
Why NISM asks about it
Chapter 7 (Concepts of Taxation): section 7.6.1 on income from salary, with the old-versus-new regime table and the Mr A and Mr B examples; section 7.6.2 on income from house property, where Section 24(a) allows 30% of net annual value. Expect the Rs 50,000 / Rs 75,000 pair, and a house property computation where the 30% must be applied after municipal taxes.
Common exam traps
- Two provisions share a name. Salary: a flat Rs 50,000 (old regime) or Rs 75,000 (new regime). House property: 30% of net annual value.
- The house property 30% applies after municipal taxes — on net annual value, not gross rent.
- No standard deduction for self-occupied property — its annual value is nil.
- Actual repair costs are irrelevant for house property; the 30% replaces them.
- Both are available in both regimes as the workbook presents them; what changes between regimes is the salary amount and, for house property, the interest and loss set-off rules.
Check yourself
1.What is the standard deduction available against salary income under the new tax regime?
- a)Rs 40,000
- b)Rs 50,000
- c)Rs 75,000
- d)Not available under the new regime
Show the answer
Answer: (c) Rs 75,000
The standard deduction is Rs 50,000 under the old tax regime and Rs 75,000 under the new tax regime. Along with the larger 80CCD(2) limit of 14 per cent for private sector employees, this is one of the only two concessions the new regime offers in exchange for the loss of HRA, LTA, 80C and 80CCD(1B).
Where this is taught
Free preparation for NISM Series X-BRelated terms
- Annual valueThe notional rental value on which income from house property is taxed — nil for self-occupied property, reasonable expected rent for deemed let-out, and the higher of that or actual rent if let out.
- Deemed let-out propertyA house property that is not actually let out but is taxed as if it were, on its reasonable expected rent, because the owner has already chosen two other houses as self-occupied.
- Marginal reliefRelief that caps the tax on income just above the section 87A rebate threshold at the amount by which the income exceeds that threshold — so one extra rupee of income never costs more than a rupee of tax.
- Section 87A rebateA tax rebate for resident individuals with total income below a threshold — up to Rs 12,500 (old regime, Rs 5 lakh), and under the new regime up to Rs 25,000 (Rs 7 lakh) or Rs 60,000 (Rs 12 lakh from FY 2025-26).
- Self-occupied propertyA house property whose annual value is taken as nil for tax purposes — and, since the Finance Act 2025, any of an owner's houses that is actually occupied, or simply not let out, up to a limit of two.
- Approved superannuation fundA superannuation fund approved by the Income Tax Commissioner under the Fourth Schedule — letting the employer deduct its contributions and giving the fund's income, and specified payouts, tax exemption.
- Accumulated profitsA company's built-up reserves of profit — the source that, under Section 2(22), turns certain distributions to shareholders (bonus debentures, buy-back proceeds, a shareholder loan) into taxable deemed dividend.
- Attributable expensesThe expenses a taxpayer may deduct while computing income from other sources — collection charges, interest on borrowed funds and similar costs incurred wholly and exclusively to earn that income.
- Salary (Section 17(1))The Income Tax Act's own definition of what counts as salary — wages, pension, gratuity, commission, advance salary, perquisites, leave encashment and more — under Section 17(1).
- Gratuity exemption (Section 10(10))Gratuity received on retirement is fully exempt for government employees, and for others is exempt up to the lowest of a formula based on service, Rs 20,00,000, or the amount actually received.
- Land appurtenant theretoLand attached to and forming part of a building, whose income is taxable under income from house property only because the building is there — vacant land alone is not.