Section 16 → Section 21
Deductions from Salaries
Quick Answer
Section 16 of the Income Tax Act, 1961 (Deductions from Salaries) corresponds to Section 21 of the Income-tax Act, 2025, effective 1st April 2026. Status: Retained.
What changed for Section 16
In the 1961 statute, Section 16 deals with deductions from salaries. Provides for Standard Deduction, Entertainment Allowance, and Professional Tax deductions.
The new code maps this to Section 21: the provision is retained and renumbered as Section 21 of the Income-tax Act, 2025, applying from 1st April 2026. Standard deduction explicitly integrated as a baseline exemption for all individual tax regimes by default.
On the ground, changes to Section 16 carry a High impact. Affects the take-home pay calculation for every salaried employee.
Sec 16
Provision Summary
Provides for Standard Deduction, Entertainment Allowance, and Professional Tax deductions.
Sec 21
Provision Summary
Standard deduction explicitly integrated as a baseline exemption for all individual tax regimes by default.
Key Changes & Highlights
- Standard Deduction limit algorithms updated to auto-adjust based on inflation indices for future years.
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Frequently Asked Questions
What does Section 16 of the Income Tax Act 1961 deal with?
Section 16 of the Income Tax Act, 1961 covers deductions from salaries. Provides for Standard Deduction, Entertainment Allowance, and Professional Tax deductions.
Where does Section 16 of the ITA 1961 go under the Income-tax Act, 2025?
Section 16 of the Income Tax Act, 1961 maps to Section 21 of the Income-tax Act, 2025, effective 1st April 2026 (status: Retained). Standard deduction explicitly integrated as a baseline exemption for all individual tax regimes by default.
Why does the change to Section 16 matter for taxpayers?
The transition impact for Section 16 is rated High. Affects the take-home pay calculation for every salaried employee.
What are the key changes to Section 16 under the Income-tax Act, 2025?
Standard Deduction limit algorithms updated to auto-adjust based on inflation indices for future years. These points are specific to Section 16 (Deductions from Salaries).
Disclaimer: This mapping of Section 16 (Deductions from Salaries) to Section 21 of the Income-tax Act, 2025 is for educational and reference purposes only, based on publicly available drafts and circulars. As Section 16 is currently marked Retained, always confirm its treatment with a qualified Chartered Accountant before filing or making compliance decisions.
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