Standard Deduction for the F.Y.2025-26/A.Y.2026-27 - Income Tax

The Finance (No. 2) Act 2024 introduced a proviso to Section 16(ia) of Income tax Act to allow an enhanced standard deduction of Rs. 75,000/-, but with a condition. The language of the proviso under Section 16(ia) of I.T. Act specifies that the higher deduction applies only when income is computed under clause (ii) of Section 115BAC(1A) i.e.,for A.Y. 2025 26. Unfortunately, the provision fails to mention clause (iii), which governs the tax rates for A.Y. 2026 27 . Thus, this limits the standard deduction to Rs. 50,000 for the A.Y. 2026-27 [and not Rs. 75,000/-]. In this context, a corrigendum may be issued by the Government of India, Ministry of Finance to resolve this drafting mistake, or alternatively, the President of India can promulgate an ordinance, by increasing the existing standard deduction of Rs. 50,000 to Rs. 75,000/- for the A.Y. 2026-27.