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Income Tax Update: Standard Deduction Raised to ₹75,000 Under New Regime

Income Tax Update

Income Tax Update

To make clear its stance on the standard deduction of Rs 75,000 under the new regime, the government revised the Income Tax update Act of 1961.

In the Union Budget 2024, the government declared that under the new system, the standard deduction would rise from Rs 50,000 to Rs 75,000. The 2025 Income Tax Bill also includes this explanation. Parliament has approved the bill. It is anticipated to take effect on April 1st of the following year.

The standard deduction is only available to those who are employed.

It is crucial to remember that only those who are working are eligible for the standard deduction. Previously, under both the old and current income tax regimes, the standard deduction was Rs 50,000. Under the new administration, the government raised it to Rs 75,000 in the Union Budget 2024. However, during the previous government, it was still Rs 50,000. The standard deduction lowers the employee’s tax obligation. Section 16(ia) of the Finance (No 2) Act, 2024, was amended by the government to raise the standard deduction to Rs 75,000 under the new regime.

On social media, the finance minister shared information on the amendment.

This has been discussed in a post by Finance Minister Nirmala Sitharaman on the social media site X. In it, she stated that we are making certain unique changes to the Income Tax Act of 1961 in addition to the new Income Tax Bill. Its goal is to provide clarification regarding the new income tax structure. According to this amendment, certain particular deductions must be applied before determining the income that falls under “salary.”

Additionally, the adjustment was included in the 2025 Income Tax update Bill.

A deduction of Rs 50,000 will be required under the new clause included in section 16(ia). The provisions of this clause shall be the same for Rs 50,000 if income tax is calculated by clause (ii) of sub-section (1O) of section 115BAC; however, Rs 75,000 will be utilized in its place. The 2025 Income Tax Bill also includes this modification.

Read More | Income Tax Bill 2025: New Tax Benefits Announced for UPS, NPS Subscribers & Pensioners

The circumstances for UPS’s deduction are now evident.

The ambiguity around the Unified Pension Scheme (UPS) deduction has been eliminated with this change. Following this, it became evident that UPS would offer the same tax benefits as the National Pension System (NPS). It is anticipated that the Income Tax Bill, 2025, will take effect on April 1st of the following year. It will take the place of the 1961 Income Tax Act. The Income Tax Act of 1961’s regulations went into effect in April 1, 1962.

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