The Finance Act, 2025, due to a drafting lapse, inadvertently reduced the standard deduction under the new tax regime from ₹75,000 to ₹50,000, for FY 25-26

 

So lets understand the drafting part-how a small drafting error can significant impact:-

Proviso to S.16(a)(i) for standard deduction, links its availability to the concessional tax regime under S.115BAC.

Proviso to S.16(ai) currently covers clause (ii) of S.115BAC(1A) i.e. rate structure for FY 24-25 only

Clause (iii) has been inserted in S.115BAC(1A) for New Tax structure for FY 25-26

Since the proviso to S.16(a)(i) did not cover clause (iii), the legal effect was that the higher standard deduction of ₹75,000 was not applicable under the new regime for FY 2025-26. Instead, the deduction fell back to the original figure of ₹50,000, legally

To resolve this anomaly correction through Taxation Laws (Amendment) Bill, 2025 [passed in Lok Sabha on 11th Aug 25] has been made which inserted a reference to clause (iii) of S115BAC(1) in the proviso to S.16(a)(i).

This ensured that the enhanced standard deduction of ₹75,000 under new regime is available for FY 2025-26!!