The Income Tax Act 2025 introduced a streamlined structure for deductions, and among them, Section 62 stands out as a universal relief for salaried taxpayers and pensioners. This provision grants a flat standard deduction of ₹75,000, effective from FY 2026‑27 (AY 2027‑28). Because it applies automatically, taxpayers benefit without needing to submit proofs or declarations. Let us explore the details, implications, and advantages of this section.
Evolution of Standard Deduction
Initially, the standard deduction appeared in Section 16(ia) of the Income Tax Act 1961. Over time, the government enhanced its value to provide greater relief. First, it was ₹40,000, then ₹50,000, and later ₹75,000 under the Finance (No. 2) Act 2024. Finally, the Income Tax Act 2025 codified it under Section 62, ensuring clarity and consistency. Consequently, taxpayers now enjoy a higher deduction that directly reduces taxable income.
Applicability of Section 62
Section 62 applies to:
· Salaried employees across both old and new regimes.
· Pensioners, who receive the same benefit.
· Family pensioners, who are entitled to a reduced deduction of ₹25,000.
Thus, whether one earns through employment or pension, the deduction ensures equitable relief. Moreover, because it is regime‑neutral, taxpayers no longer face confusion about eligibility.
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Key Features of Section 62
· Flat Deduction: ₹75,000 from salary or pension income.
· Automatic Application: No documentation required.
· Universal Coverage: Applies to both regimes.
· Family Pension Cap: Limited to ₹25,000.
· Effective Year: FY 2026‑27 onwards.
Therefore, Section 62 simplifies compliance while maximising relief.
Practical Impact on Taxpayers
Consider a taxpayer in the 30% slab. The increase from ₹50,000 to ₹75,000 saves an additional ₹25,000 in taxable income. As a result, the tax saving equals ₹7,800 (including cess). For middle‑class families, this relief translates into higher disposable income. Furthermore, because employers automatically reflect the deduction in Form 16, taxpayers need not claim it separately in their ITR.
Interaction with Other Deductions
Section 62 operates independently of Chapter VIA deductions such as Section 123 (old 80C), Section 129 (old 80D), or Section 132 (old 80E). Consequently, taxpayers can claim both the standard deduction and other deductions simultaneously. This interaction enhances overall tax planning opportunities. In addition, professionals advising clients must update templates and compliance checklists to reflect the new numbering.
Compliance and Transition
From FY 2025‑26, Form 16 and ITRs still use old section references. However, beginning FY 2026‑27, employers and taxpayers must adopt the new numbering. Therefore, professionals should ensure that salary slips, tax calculators, and advisory documents align with Section 62. Transitioning smoothly avoids confusion and ensures accurate filings.
Advantages of Section 62
· Simplification: Eliminates the need for proofs.
· Equity: Benefits both salaried and pensioners.
· Neutrality: Applies across regimes.
· Relief: Provides tangible tax savings.
· Clarity: Codified under a single section.
Hence, Section 62 strengthens taxpayer confidence in the system.
Conclusion
In summary, Section 62 of the Income Tax Act 2025 delivers a standard deduction of ₹75,000 for salaried taxpayers and pensioners, while family pensioners receive ₹25,000. Because it applies automatically, taxpayers enjoy relief without additional effort. Moreover, its regime‑neutral nature ensures fairness. As FY 2026‑27 begins, professionals and taxpayers must recognise Section 62 as a cornerstone of tax planning. Ultimately, this provision reflects the government’s intent to simplify compliance and enhance disposable income for millions of citizens.
