Section 19 — Deductions from Salaries | ITA 2025

Section 19 is a TABLE-based provision listing 14 categories of allowed deductions / exemptions from salary income. Structured as: sub-section (1) operative provision read with the 14-row Table; sub-section (2) explanatory provisions for…

Section 19 — DEDUCTIONS FROM SALARIES

Statutory text — Income-tax Act, 2025

Marginal note — Deductions from salaries

(1) The income chargeable under the head "Salaries" shall be computed after making the deductions in respect of sums of the nature mentioned in column B of the following Table, not exceeding the amount as mentioned in column C thereof:—

TABLE

Sl. No. (A)	Nature of sum (B)	Amount of deduction (C)
1.	Sum paid by the assessee as a tax on employment as per article 276(2) of the Constitution, leviable by or under any law.	Entire amount.
2.	Standard deduction.	(a) Rs. 75,000 or the salary, whichever is less, where income-tax is computed under section 202(1); (b) Rs. 50,000 or the salary, whichever is less, in any other case.
3.	Death-cum-retirement gratuity received as referred to in sub-section (2)(g).	Entire amount.
4.	Payment of retiring gratuity received under the Pension Code or Regulations applicable to the members of the defence services.	Entire amount.
5.	Gratuity received under the Payment of Gratuity Act, 1972 (39 of 1972).	Amount received, as restricted to the amount calculated as per the provisions of section 4(2) and (3) of the said Act.
6.	Any other gratuity received by an employee on his retirement; or on his becoming incapacitated before such retirement; or on termination of his employment.	Amount being minimum of (a) actual gratuity received; (b) amount specified by the Central Government, by notification, having regard to the limit applicable in this behalf to the employees of the Central Government; and (c) half month's salary for each completed year of service, calculated as Amount = (1/2) x (A x B), where A = average salary for ten months immediately preceding the month when any such event occurs; B = number of such completed years.
7.	Payment in commutation of pension received (a) under the Civil Pensions (Commutation) Rules of the Central Government; or (b) under any similar scheme applicable to (i) civil services of Union; (ii) all-India services; (iii) defence services; (iv) civil services of a State; or (v) employees of a local authority or corporation under Central/State/Provincial Act.	Entire amount.
8.	Payment in commutation of pension is received under any scheme from any other employer.	The commuted value shall be determined having regard to age, health, interest rate and mortality tables; (a) where employee received gratuity, commuted value of one-third of pension normally entitled; (b) in any other case, commuted value of one-half of such pension.
9.	Payment in commutation of pension received from a fund as specified in Schedule VII (Table: Sl. No. 3).	Entire amount.
10.	Compensation received by a workman at the time of his retrenchment under (a) Industrial Disputes Act, 1947; (b) any other Act/rules/orders/notifications; (c) any standing orders; or (d) any award, contract of service or otherwise.	Minimum of (a) compensation received; (b) amount calculated as per section 25F(b) of Industrial Disputes Act, 1947; (c) such amount, not being less than Rs. 50,000, as may be notified by the Central Government.
11.	Compensation referred to in Sl. No. 10, where received in accordance with any scheme which the Central Government may approve, having regard to (a) need for special protection to workmen; and (b) other relevant circumstances.	Compensation received.
12.	Amount received or receivable on voluntary retirement or termination of service under a scheme of voluntary retirement, by an employee referred to in sub-section (2)(h).	Minimum of (a) compensation received; and (b) Rs. 5,00,000.
13.	Payment received by an employee of the Central Government or a State Government as the cash equivalent of the leave salary in respect of the period of earned leave at his credit at the time of his retirement (whether on superannuation or otherwise).	Entire amount.
14.	Payment of the nature referred against serial number 13 received by an employee who is not a Central Government or State Government employee.	Amount being minimum of (a) cash equivalent of leave salary in respect of period of earned leave at credit at the time of retirement (max 30 days per year of actual service); (b) amount A, where A = 10 x B; B = average monthly salary for ten months immediately preceding retirement; (c) amount as Central Government may, by notification, specify having regard to the limit applicable to that Government's employees; and (d) actual payment received.

(2) For the purposes of the Table referred to in sub-section (1),—

(a) for entries against Sl. No. 6, if gratuity from one or more employers in same tax year, aggregate deduction shall not exceed A − B (A = CG-notified limit; B = aggregate gratuity earlier received and exempted/deducted);

(b) for entries against Sl. Nos. 6 and 14, "Salary" includes dearness allowance if terms of employment so provide, but excludes all other allowances and perquisites;

(c) for entries against Sl. Nos. 10 and 11, deemed-compensation includes (i) compensation on closing-down of undertaking; (ii) compensation on transfer of undertaking where service is interrupted, terms become less favourable, or new employer is not legally liable for retrenchment compensation;

(d) for entries against Sl. Nos. 10 and 11, "employer" and "workman" have meanings in Industrial Disputes Act, 1947;

(e) Sl. No. 12 entry subject to: (i) scheme made per CBDT guidelines; (ii) no double-claim across years; (iii) no double-deduction with section 157 relief;

(f) for entries against Sl. No. 14, multi-employer leave salary aggregation formula A − B applies (similar to (a));

(g) Sl. No. 3 death-cum-retirement gratuity must be under Central Government revised pension rules / CCS (Pension) Rules, 2021 / similar schemes for civil services / all-India services / State civil services / local authority employees;

(h) Sl. No. 12 VRS schemes apply to: public sector company / any other company / authority under Central/State/Provincial Act / local authority / co-operative society / University / IIT / Central or State Government / institution of national/State importance / institute of management.

Corresponding provision — 1961 regime

INCOME-TAX ACT, 2025	INCOME-TAX ACT, 1961
INCOME-TAX ACT, 2025 — s. 19	INCOME-TAX ACT, 1961
Standard deduction Rs. 75,000 (new) / Rs. 50,000 (old)	1961 s. 16(ia) — same FA 2024 enhancement
Professional tax (Sl. No. 1)	1961 s. 16(iii) — preserved
Gratuity (Sl. Nos. 3-6)	1961 s. 10(10) consolidated
Commuted pension (Sl. Nos. 7-9)	1961 s. 10(10A) consolidated
Retrenchment compensation (Sl. Nos. 10-11)	1961 s. 10(10B) consolidated
VRS compensation Rs. 5L cap (Sl. No. 12)	1961 s. 10(10C) consolidated
Leave encashment (Sl. Nos. 13-14)	1961 s. 10(10AA) consolidated

The 2025 Act CONSOLIDATES 1961 ss. 10(10), 10(10A), 10(10AA), 10(10B), 10(10C), and s. 16 deductions into a single 14-row Table under s. 19.

STATUTORY ARCHITECTURE

Section 19 consolidates all salary-related deductions into a single Table format. The 14 entries cover: (a) Standard deductions (Sl. No. 1-2); (b) Retirement benefits (Sl. No. 3-9) — gratuity + commuted pension; (c) Termination benefits (Sl. No. 10-14) — retrenchment + VRS + leave encashment.

STANDARD DEDUCTION — Historical Evolution

Standard deduction was abolished in 2005, reintroduced by FA 2018 at Rs. 40,000, enhanced to Rs. 50,000 by FA 2019, further enhanced to Rs. 75,000 by FA 2024 for new-regime opted assessees (Sl. No. 2(a)). Old-regime continues at Rs. 50,000 (Sl. No. 2(b)).

JUDICIAL EVOLUTION — Gratuity Lifetime Cap

CIT v. Cochin Refineries Ltd., multiple HC line — held that the 'amount specified by Central Government' (Sl. No. 6(b) — currently Rs. 20 lakh post FA 2023) is the LIFETIME aggregate cap; multiple-employer gratuity receipts are pooled. The s. 19(2)(a) explanation reinforces this — A minus B formula prevents inflation across years.

JUDICIAL EVOLUTION — VRS Scheme Approval

CIT v. Sail DSP VR Employees line — VRS scheme MUST be CBDT-approved (Income-tax Rules, 2026 r. 14, continued from 1962 r. 2BA) to qualify for Sl. No. 12 / Rs. 5L cap. Manual / non-approved VRS forfeits deduction entirely.

JUDICIAL EVOLUTION — Leave Encashment Cap

Sl. No. 13: Government employees get FULL exemption. Sl. No. 14: non-Government employees subject to four-fold cap of (a) actual cash equivalent (max 30 days/year of service); (b) 10 x average monthly salary; (c) Central Government notified limit (currently Rs. 25 lakh post FA 2023); (d) actual payment. Lowest of these four caps the deduction.

DEPARTMENTAL PRACTICE

Income-tax Rules, 2026 r. 14 — VRS scheme conditions. Form 16 Part B — segregated reporting of each Sl. No. deduction. Form 12BB — annual declaration. CBDT periodically updates cap amounts.

PLANNING NOTES & LITIGATION DEFENCE

(i) Standard deduction auto-applied; verify Form 16. (ii) Multi-employer same FY: per-assessee, ONE claim only. (iii) Multi-year gratuity: apply s. 19(2)(a) A−B aggregation. (iv) For VRS, ensure CBDT approval; cite Sail DSP. (v) Leave encashment > Rs. 25 lakh: excess falls under s. 18 (profits in lieu); claim s. 157 relief via Form 10E.

CROSS-REFERENCES

Section 15 — Salaries charge.
Section 16 — Income from salary (definition).
Section 17 — Perquisite.
Section 18 — Profits in lieu of salary.
Section 92 — Other Sources (family pension head).
Section 157 — Relief for arrears / advance receipts.
Section 202(1) — New regime (default).
Schedule VII — Pension fund classification.
Income-tax Rules, 2026 r. 14 — VRS scheme conditions.
Form 12BB / Form 16 Part B.

← All sections (537)Act 2025 hub