Section 19 · Salaries
Section 19 of the Income-tax Act, 2025 — Deductions from Salary and Standard Deduction
By CA Rajat Agrawal
Updated 03 Jul 2026
Chapter IV
📜 What the law says — Section 19, Income-tax Act 2025
19. (1) The income chargeable under the head "Salaries" shall be computed after making the deductions in respect of the sums mentioned in column B of the Table, not exceeding the amount in column C:—
1. Tax on employment (professional tax) under article 276(2) of the Constitution — Entire amount.
2. Standard deduction — (a) ₹75,000 or the salary, whichever is less, where tax is computed under section 202(1); (b) ₹50,000 or the salary, whichever is less, in any other case.
3-5. Death-cum-retirement gratuity / retiring gratuity / gratuity under the Payment of Gratuity Act, 1972 — exempt to the extent specified. (Table continues.)
In plain language
What Section 19 actually does
When you earn a salary, you are not taxed on the full gross figure. Section 19 of the Income-tax Act, 2025 lists the specific deductions the law allows you to subtract from your "salary" before it is taxed under the head Salaries. It is the direct successor to Section 16 of the old Income-tax Act, 1961 (and pulls in the salary-related exemptions that earlier sat in Section 10, such as gratuity and leave encashment). Section 19 is effective from 1 April 2026 for Tax Year 2026-27.
Who it applies to
- All salaried employees — government, PSU and private sector alike.
- Pensioners receiving pension from a former employer (pension is taxed as salary, so the standard deduction applies).
- It does not apply to freelancers, business owners or professionals whose income is under "Profits and gains of business or profession" — they get expense deductions instead.
The main deductions under Section 19
- Standard deduction (the big one): A flat deduction with no bills or proof needed. It is ₹75,000 or the salary amount, whichever is less, if your tax is computed under the new regime in Section 202(1). In every other case (i.e. the old regime), it is ₹50,000 or salary, whichever is less.
- Professional tax / tax on employment: The entire amount of employment tax you pay to a State (levied under Article 276(2) of the Constitution, capped at ₹2,500 a year) is deductible. Note: in practice this is only useful under the old regime.
- Gratuity: Government employees get full exemption. For private employees covered by the Payment of Gratuity Act, 1972, the exempt amount is the least of actual gratuity, ₹20 lakh (lifetime ceiling), or 15/26 × last drawn salary × completed years of service.
- Commuted pension: Fully exempt for government employees; for others, one-third (if gratuity also received) or one-half of the pension value is exempt.
- Leave encashment on retirement: Fully exempt for government staff; for others, least of actual, ₹25 lakh, 10 months' average salary, or cash value of earned leave.
- Retrenchment compensation and Voluntary Retirement Scheme (VRS) receipts: exempt up to statutory formulas / ₹5 lakh for VRS.
How it interacts with related sections
- Section 202 is the switch that decides your standard deduction size — choose the new regime and you get ₹75,000; opt out to the old regime and it drops to ₹50,000.
- Combined with the Section 202 rebate (up to ₹60,000, replacing the old Section 87A), the ₹75,000 standard deduction is why a salaried person can earn up to ₹12.75 lakh with zero tax under the new regime.
- Section 15/16 to 19 together define what salary includes, what is exempt and what is deductible.
Practical implications
- The standard deduction is automatic — your employer factors it into TDS and the ITR utility auto-applies it. No investment, rent receipt or document is required.
- The deduction cannot exceed your salary — a person with ₹40,000 salary gets only ₹40,000, not ₹75,000.
- Under the new regime you lose professional tax and most other Chapter VIA deductions, but the larger ₹75,000 flat deduction partly compensates. Most salaried taxpayers up to ~₹13-15 lakh now come out ahead in the new regime.
💡 Example
Example 1 — New regime (Section 202). Rohan is a software engineer with a gross salary of ₹14,00,000 in FY 2026-27. Under the new regime his standard deduction under Section 19 is ₹75,000, so his taxable salary is ₹14,00,000 − ₹75,000 = ₹13,25,000. Because this exceeds ₹12 lakh, he does not get the full Section 202 rebate, but the standard deduction alone still trims his tax by shifting ₹75,000 out of the top slab.
Example 2 — Old regime. Meena earns a gross salary of ₹9,00,000 and pays ₹2,500 professional tax. She stays in the old regime. Her deductions under Section 19 are: standard deduction ₹50,000 + professional tax ₹2,500 = ₹52,500. Her salary chargeable to tax becomes ₹9,00,000 − ₹52,500 = ₹8,47,500 (before Chapter VIA deductions like 80C).
A relatable story. Priya, a first-job graduate, panicked when she saw her CTC of ₹6,00,000 and assumed tax on the whole amount. Her uncle, a CA, explained Section 19: "The government already assumes you have job-related expenses, so it hands you a flat ₹75,000 off the top in the new regime — no receipts, no fuss. Add the Section 202 rebate and your tax is effectively nil." Priya relaxed, filed under the new regime, and paid zero tax.
| Deduction under Section 19 | New regime (Sec 202) | Old regime |
|---|
| Standard deduction | ₹75,000 or salary, whichever is less | ₹50,000 or salary, whichever is less |
| Professional / employment tax | Not allowed in practice | Entire amount paid (max ₹2,500/yr) |
| Gratuity (private, Gratuity Act) | Least of actual, ₹20 lakh, or 15/26 × last salary × years |
| Leave encashment (non-govt, retirement) | Least of actual, ₹25 lakh, 10 months' avg salary, or cash value of earned leave |
| VRS compensation | Exempt up to ₹5,00,000 |
| Salaried zero-tax ceiling (with rebate) | Up to ₹12,75,000 | Up to ₹5,00,000 (rebate) |
Related sections
Section 15 — Salaries chargeable to tax Section 16 (1961) — Old equivalent of salary deductions Section 17 — Meaning of salary, perquisites and profits in lieu Section 202 — New tax regime rates and ₹60,000 rebate Section 10(10) (1961) — Gratuity exemption Section 89 — Relief for arrears of salary
Frequently asked questions
Is the standard deduction ₹75,000 or ₹50,000?
It is ₹75,000 (or your salary, whichever is lower) if you are taxed under the new regime in Section 202(1). If you opt for the old regime, it is ₹50,000. The higher amount applies automatically when you file under the new regime.
Do I need bills or proof to claim the standard deduction?
No. The standard deduction is a flat, automatic amount that needs no receipts, no investment and no supporting documents. Your employer applies it in TDS and the ITR utility applies it too.
Can pensioners claim the standard deduction under Section 19?
Yes. Pension from a former employer is taxed as salary, so retirees receiving such pension get the same ₹75,000 (new regime) or ₹50,000 (old regime) standard deduction. Family pension has a separate, smaller deduction.
Can I claim both the standard deduction and professional tax?
Only in the old regime, where you can claim the ₹50,000 standard deduction plus the full professional tax you paid (capped at ₹2,500 a year). Under the new regime, professional tax is not deductible.
Why is salary up to ₹12.75 lakh tax-free for salaried people?
Because the ₹75,000 standard deduction under Section 19 brings ₹12.75 lakh gross salary down to ₹12 lakh taxable, and the Section 202 rebate of up to ₹60,000 wipes out the tax on income up to ₹12 lakh.
Is gratuity fully tax-free?
For government employees, yes. For private employees under the Payment of Gratuity Act, the exemption is the least of actual gratuity, the ₹20 lakh lifetime ceiling, or 15/26 × last drawn salary × completed years of service; any excess is taxable.
What if my salary is less than ₹75,000 in a year?
The standard deduction can never exceed your salary. If your salary is, say, ₹40,000, your standard deduction is capped at ₹40,000, reducing your taxable salary to nil.
C
CA Rajat Agrawal
Chartered Accountant, EaseValue · Reviewed 03 Jul 2026
This explainer is prepared and reviewed by EaseValue's tax team, based on the text of the Income-tax Act, 2025 (as amended by the Finance Act, 2026).
Disclaimer: This page explains the law in general terms for education and is not professional advice. The Income-tax Act, 2025 takes effect from 1 April 2026; provisions, thresholds and interpretations may change. Please confirm your specific position with our team before acting.
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