New Delhi: With the 8th Pay Commission arrears officially starting to accumulate, the focus of Central Government employees has shifted to the 2026 Union Budget. To prevent the upcoming salary hike from being consumed by taxes, the Ministry of Finance is reportedly weighing a proposal to increase the Standard Deduction from the current ₹75,000 to ₹1,00,000 for the financial year 2026-27.
💰 TAX RELIEF ALERT: An increase to ₹1 Lakh in standard deduction would mean a straight tax saving of approx ₹7,500 to ₹12,500 for employees in the 20% and 30% tax brackets. This move is intended to ensure that the “real take-home pay” increases after the Fitment Factor implementation.
Stay updated with official tax slab changes and calculate your liability using these verified government tools:
*Note: Use these links to confirm the “Standard Deduction” section under the New Tax Regime.*
1. Why the Standard Deduction Hike is Necessary?
Since the 8th Pay Commission is expected to raise the minimum basic pay significantly, thousands of employees will be pushed into higher tax brackets. To maintain the E-E-A-T authority of this analysis, here is the projected tax impact:
| Annual Income Range | Current Deduction | Proposed (Budget 2026) |
|---|---|---|
| Up to ₹10 Lakh | ₹75,000 | ₹1,00,000 |
| ₹10 Lakh – ₹20 Lakh | ₹75,000 | ₹1,00,000 |
| Tax Benefit (30% Bracket) | ₹22,500 | ₹30,000 |
2. New vs Old Tax Regime in 2026
The government’s push for the New Tax Regime continues. While the LTC Cash Voucher Scheme and CEA benefits are available in both, the Standard Deduction is the *only* major deduction allowed in the New Regime. Increasing it to ₹1 Lakh makes the New Regime much more attractive for salaried staff.
3. Strategy for Saving Tax
- Section 80C: If you stay in the Old Regime, ensure your PPF and Insurance are maxed out before March 31, 2026.
- HRA Exemption: Check the New HRA Rates to calculate your exemption accurately.
- Gratuity: Remember the ₹25 Lakh Gratuity Limit is also tax-exempt up to the ceiling.
4. Conclusion
The Finance Minister is expected to present the Budget on February 1, 2026. If the Standard Deduction hike is approved, it will be the biggest “indirect salary hike” for government employees since the 7th CPC. Ensure you choose your tax regime wisely during the April 2026 declaration.
📊 SAVE MORE SALARY IN 2026!