Standard Deduction & Salary Exemptions, Explained

By the MyTaxLocker Team · Updated 11 June 2026

Before any deductions like 80C, your salary already gets a couple of automatic reductions. The biggest and simplest is the standard deduction — and unlike most benefits, it's available under both tax regimes.

The standard deduction

The standard deduction is a flat amount subtracted from your salary, with no bills or proof required. It's available to salaried employees and pensioners. The amount has differed by regime — historically ₹50,000 under the Old regime, with a higher figure introduced for the New regime. Because this figure has been revised in recent budgets, confirm the exact amount for your assessment year on the official portal.

Salary exemptions under the Old regime

Beyond the standard deduction, the Old regime lets you exclude several allowances from taxable salary, subject to conditions and limits:

• House Rent Allowance (HRA) — partly exempt if you pay rent (see our HRA guide).
• Leave Travel Allowance (LTA) — for travel within India, subject to rules.

Professional tax deducted by your state is also reduced from your salary income.

Gratuity & leave encashment

Gratuity received on retirement or resignation is exempt up to prescribed limits (a notified ceiling applies to most employees; government employees receive a fuller exemption). Leave encashment on retirement is exempt up to a notified limit. Unlike HRA and LTA, these two are exemptions available under both regimes — you don't lose them by choosing the New regime.

What carries over to the New regime

Under the New regime, the standard deduction and your employer's NPS contribution (80CCD(2)) are among the few benefits that still apply. Most allowance exemptions — HRA, LTA, and the like — do not. That's a key input when you weigh the two regimes against each other.