Chapter IV - Computation of Total Income
Section 19
Section 19: deductions from salaries
Section 19 sets out deductions used while computing income chargeable under the head "Salaries", including standard deduction, professional tax, gratuity, pension commutation, retrenchment compensation, voluntary retirement payments and leave encashment. The applicable tax regime matters: Section 202(2)(a)(iv) excludes the professional-tax deduction in Table Sl. No. 1 for a person taxed under the default new regime, while the standard deduction is Table Sl. No. 2.
On this page
Need advice on Section 19?
This article is for general information. Refer to the Income-tax Act, 2025 as amended by the Finance Act, 2026 and the Taxation and Other Laws (Amendment) Act, 2026 for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
(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:—
| Sl. No. | Nature of sum | Amount of deduction |
|---|---|---|
| 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) ₹75000 or the salary, whichever is less, where income-tax is computed under section 202(1); (b) ₹50000 or the salary, whichever is less, in any other case. |
| 3 | Death-cum-retirement gratuity received as referred to in subsection (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— (i) on his retirement; or (ii) on his becoming incapacitated before such retirement; or (iii) 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 under:— Amount = (A × B) / 2 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) the members of the civil services of the Union or holders of posts connected with defence or of civil posts under the Union, [such members or holders not covered under (a)]; (ii) the members of the all-India services; (iii) the members of the defence services; (iv) the members of the civil services of a State, or the holders of civil posts under a State; or (v) the employees of a local authority or a corporation established by a Central Act or State Act or 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 the age of the recipient, the state of his health, the rate of interest and officially recognised tables of mortality, and— (a) where the employee has received gratuity, the commuted value of one-third of the pension, which he is normally entitled to receive; and (b) in any other case, the 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— (a) under the Industrial Disputes Act, 1947 (14 of 1947); or (b) under any other Act or rules, orders or notifications issued thereunder; or (c) under any standing orders; or (d) under any award, contract of service or otherwise. | Minimum of— (a) compensation received; (b) amount calculated as per provisions of section 25F(b) of the Industrial Disputes Act, 1947 (14 of 1947); (c) such amount, not being less than ₹50000, as may be notified by the Central Government. |
| 11 | In case of compensation referred to in Sl. No. 10, where such compensation received is in accordance with any scheme which the Central Government may approve in this behalf, having regard to— (a) the need for extending special protection to the workmen in the undertaking to which such scheme applies; and (b) other relevant circumstances. | Compensation received. |
| 12 | Amount received or receivable on voluntary retirement or termination of service under a scheme or schemes of voluntary retirement, by an employee as referred to in sub-section (2)(h). | Minimum of— (a) compensation received; and (b) ₹500000. |
| 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) 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 (entitlement of earned leave shall not exceed thirty days for every year of actual service); (b) amount “A”, where,— A=10 × B; B = average monthly salary for the ten months immediately preceding his retirement whether on superannuation or otherwise; (c) amount as the Central Government may, by notification, specify in this behalf having regard to the limit applicable in this behalf to the employees of that Government; and (d) actual payment received. |
(2) For the purposes of the Table referred to in sub-section (1),— (a) in respect of the entries against serial number 6 thereof, if gratuity or gratuities was or were received from one or more than one employer in the same tax year (whether or not any gratuity or gratuities was or were received in any earlier tax year), the aggregate amount of deduction shall not exceed— A – B, where,— A = the limit specified by the Central Government, by notification; and B = the aggregate amount of gratuity or gratuities which was or were received in any one or more earlier tax years and allowed as an exemption or a deduction (whether whole or part) from the total income of any such tax year or years; (b) in respect of the entries against serial numbers 6 and 14 thereof, “Salary” includes dearness allowance, if the terms of employment so provide, but excludes all other allowances and perquisites; (c) in respect of the entries against serial numbers 10 and 11 thereof, the following amounts shall be deemed to be compensation received at the time of retrenchment:— (i) compensation received by a workman at the time of the closing down of the undertaking in which he is employed; (ii) compensation received by a workman, at the time of the transfer (whether by agreement or by operation of law) of the ownership or management of the undertaking in which he is employed, from the employer in relation to that undertaking to a new employer, if—(A) the service of the workman has been interrupted by such transfer; or (B) the terms and conditions of service applicable to the workman after such transfer are in any way less favourable to the workman than those applicable to him immediately before such transfer; or (C) the new employer is, under the terms of such transfer or otherwise, legally not liable to pay to the workman, in the event of his retrenchment or compensation on the basis that his service has been continuous and has not been interrupted by such transfer; (d) in respect of the entries against serial numbers 10 and 11 thereof, the expressions “employer” and “workman” shall have the same meanings as respectively assigned to them in the Industrial Disputes Act, 1947 (14 of 1947); (e) the provisions of the entries against serial number 12 thereof shall be subject to the following conditions:— (i) the applicable schemes of the said companies or authorities or societies or Universities or the institutes referred to in clauses (h)(vii) and (x), governing the payment of such amount are made as per such guidelines (including, inter alia, criteria of economic viability) as may be issued in this behalf; (ii) where deduction has been allowed to an employee in respect of the said item for any tax year, no deduction thereunder shall be allowed to him in relation to any other tax year; and (iii) where any relief under section 157 has been allowed to an assessee for any tax year in respect of any amount referred to in the said item, such amount shall not be allowed as a deduction from the compensation received or receivable in any tax year; (f) in respect of the entries against serial number 14 thereof, if any payment on account of cash equivalent of leave salary is received from one or more than one employer in the same tax year (whether or not any such payment or payments was or were received in any earlier tax year), the aggregate amount of deduction shall not exceed— A – B, where,— A = the limit specified by the Central Government, by notification; and B = the aggregate amount of payment or payments which was received in any one or more earlier tax years and allowed as an exemption or a deduction (whether whole or part) from total income of any such tax year or years; (g) the death-cum-retirement gratuity referred to in sub-section (1) (Table: Sl. No. 3) shall be as— (A) received under the revised pension rules of the Central Government, or the Central Civil Services (Pension) Rules, 2021; or (B) received under any similar scheme applicable—(i) to the members of the civil services of the Union or holders of posts connected with defence or of civil posts under the Union (such members or holders being persons not governed by the said rules); (ii) to the members of the all-India services; (iii) to the members of the civil services of a State or holders of civil posts under a State; or (iv) to the employees of a local authority; (h) the schemes of voluntary retirement or termination of service as referred to in sub-section (1) (Table: Sl. No. 12) shall be for the employees of— (i) a public sector company (under a scheme of voluntary separation); or (ii) any other company; or (iii) an authority established under a Central Act or State Act or Provincial Act; or (iv) a local authority; or (v) a co-operative society; or (vi) a University established or incorporated by or under a Central Act or State Act or Provincial Act and an institution declared to be a University under section 3 of the University Grants Commission Act, 1956 (3 of 1956); or (vii) an Indian Institute of Technology within the meaning of section 3(g) of the Institutes of Technology Act, 1961 (59 of 1961); or (viii) the Central or any State Government; or (ix) an institution, having importance throughout India or in any State or States, as the Central Government may, by notification, specify in this behalf; or (x) such institute of management, as the Central Government may, by notification, specify in this behalf.
Introduction
Section 19 is a deduction provision within the salaries head. Each deduction has its own conditions and amount, and the chosen tax regime can affect availability.
Key takeaways
Salary deductions are itemised
Salary income is reduced only by the deductions and limits specified in Section 19's table, including professional tax and standard deduction.
Standard deduction varies
The table provides a different standard-deduction ceiling when income-tax is computed under Section 202(1) than in other cases.
Retirement receipts
Several gratuity, pension and other retirement-related items have separate conditions and limits in the table.
The deductions allowed
Section 19(1) sets out a table of qualifying sums and the amount of deduction allowed for each. A summary:
| Nature of sum | Amount of deduction |
|---|---|
| Tax on employment (professional tax) paid under Article 276(2) of the Constitution | Entire amount where permitted; excluded by Section 202(2)(a)(iv) under the default new regime |
| Standard deduction | ₹75,000 or the salary, whichever is less, where tax is computed under section 202(1); otherwise ₹50,000 or the salary, whichever is less |
| Death-cum-retirement gratuity (as referred to in section 19(2)(g)) | Entire amount |
| Retiring gratuity under Pension Code/Regulations for defence service members | Entire amount |
| Gratuity under the Payment of Gratuity Act, 1972 | Amount received, restricted to the amount calculated under section 4(2) and 4(3) of that Act |
| Any other gratuity received on retirement, incapacitation, or termination | Minimum of: actual gratuity received; an amount notified by the Central Government; and half a month's salary for each completed year of service (as per the formula in the section) |
| Commuted pension under Central Government Civil Pensions (Commutation) Rules or similar schemes for specified categories of Government/public employees | Entire amount |
| Commuted pension received under any other employer's scheme | A commuted value determined by age, health, interest rates and mortality tables - one-third of the normal pension entitlement if gratuity was also received, otherwise one-half |
| Commuted pension from a fund specified in Schedule VII (Table: Sl. No. 3) | Entire amount |
| Retrenchment compensation under the Industrial Disputes Act, 1947 (or similar rules/orders/standing orders/awards) | Minimum of: compensation received; the amount calculated under section 25F(b) of the Industrial Disputes Act, 1947; and an amount (not less than ₹50,000) as notified by the Central Government |
| Retrenchment compensation under a Central Government-approved special protection scheme | Compensation received (entire amount) |
| Amount received on voluntary retirement or termination under a VRS scheme (section 19(2)(h)) | Minimum of: compensation received; and ₹5,00,000 |
| Leave salary cash equivalent on retirement, for a Central/State Government employee | Entire amount |
| Leave salary cash equivalent on retirement, for other employees | Minimum of: cash equivalent of earned leave at credit (capped at 30 days per year of actual service); 10 × average monthly salary for the preceding 10 months; an amount notified by the Central Government; and the actual payment received |
Clarifications and aggregation rules (Section 19(2))
For other gratuity under Table Sl. No. 6, subsection (2)(a) limits the aggregate deduction for receipts from one or more employers in the same tax year to the notified limit less gratuity amounts allowed as exemption or deduction in earlier tax years. This particular aggregation rule should not be applied indiscriminately to every gratuity row.
For Table Sl. Nos. 6 and14 specifically, subsection (2)(b) includes dearness allowance in salary if the employment terms provide for it and excludes all other allowances and perquisites. This definition is tied to those two rows.
For non-government leave-salary receipts under Table Sl. No. 14, subsection (2)(f) applies the notified overall limit less qualifying amounts already exempted or deducted in earlier years. The rule covers receipts from one or more employers in the same tax year.
The VRS deduction is restricted to employees of the employer categories listed in section 19(2)(h). For schemes of the companies, authorities, societies, universities and institutes specified in section 19(2)(e)(i), the scheme must follow the applicable guidelines. Once this deduction is allowed for one tax year, it cannot be claimed again for another; an amount for which relief under section 157 has been allowed cannot also receive this deduction.
The death-cum-retirement gratuity deduction applies to gratuity received under the Central Civil Services (Pension) Rules, 2021 (or predecessor rules) or similar schemes applicable to Union/State civil servants, defence-connected civil posts, all-India services members, or local authority employees.
Check the deduction path
Start with salary included under Sections 15–18 and identify the exact Section 19 clause for the claimed deduction.
For any amount tied to tax regime, employment status or actual payment, test that condition for the tax year before computing the final salary income.
Step-by-step flow for applying Section 19
- 1
List each salary receipt and its nature
Match each item to a serial number in the Table in Section 19(1): professional tax, standard deduction, gratuity, commuted pension, retrenchment compensation, voluntary retirement amounts, leave encashment.
- 2
Which tax regime applies?
Standard deduction (Sl. No. 2) is ₹75,000 or the salary, whichever is less, where tax is computed under Section 202(1); otherwise ₹50,000 or the salary, whichever is less.
- 3
Does the item have a 'minimum of' limit?
Sl. Nos. 6, 10, 12 and 14 allow the lowest of several amounts. Some limits are left to Central Government notification and must be taken from the current notification.
- Entire amount: Deduct the full sum (e.g. Sl. Nos. 1, 3, 4, 7, 9, 13).
- Minimum of: Compute each limb and take the lowest.
- 4
Apply the Section 19(2) aggregation rules
For gratuity (Sl. No. 6) and non-Government leave encashment (Sl. No. 14), the deduction across employers and years cannot exceed the notified limit less amounts already allowed in earlier years. A voluntary retirement deduction (Sl. No. 12) is available only for one tax year.
- 5
Deduct the total from income under the head "Salaries"
Practical checklist
Do
- Keep a worksheet showing gross salary, the applicable Section 19 clause and the supporting amount.
- Check the tax regime and any statutory cap before claiming a deduction.
Avoid
- Do not transfer a deduction from the old-regime computation into the default new-regime computation without checking its availability.
Illustrative example
Worked example: gratuity of a private-sector employee not covered by the Payment of Gratuity Act
Hypothetical facts (illustration only, not a real taxpayer): Mr. Menon retires after 20 completed years of service and receives gratuity of ₹10,00,000. He is not covered by the Payment of Gratuity Act, 1972. His average salary (basic pay plus dearness allowance that forms part of his terms of employment) for the ten months before the month of retirement is ₹80,000. He has never received gratuity before. The notified limit is assumed at ₹20,00,000 purely for illustration; the actual figure must be taken from the Central Government notification.
Limb (a): actual gratuity
₹10,00,000.
Limb (b): notified limit
₹20,00,000 (assumed). Under Section 19(2)(a) this limit is reduced by gratuity allowed in earlier years, which is nil here.
Limb (c): half month's salary per completed year
(A × B) / 2 = (₹80,000 × 20) / 2 = ₹8,00,000. Salary here includes dearness allowance only if the terms of employment so provide, and excludes other allowances and perquisites (Section 19(2)(b)).
Deduction
Lowest of ₹10,00,000, ₹20,00,000 and ₹8,00,000 = ₹8,00,000.
Outcome
- Deduction under Sl. No. 6 is ₹8,00,000; the balance ₹2,00,000 of gratuity remains in salary income.
- The standard deduction under Sl. No. 2 is claimed separately, depending on whether tax is computed under Section 202(1).
Glossary
- Salary deduction
- An amount specifically permitted to reduce salary income under Section 19, subject to its clause's limits.
Frequently asked questions
What is the standard deduction under Section 19?
₹75,000 (or the salary, if lower) where tax is computed under section 202(1); otherwise ₹50,000 (or the salary, if lower), in any other case.
Is professional tax fully deductible from salary income?
Under Section 19(1) Table Sl. No. 1, the amount paid is deductible when that deduction is available. It is not available when tax is computed under the default new regime in Section 202(1), because Section 202(2)(a)(iv) excludes that table entry.
What is the maximum deduction for a voluntary retirement (VRS) payment?
The lower of the compensation received and ₹5,00,000, for employees and schemes meeting the conditions in section 19(2)(e) and (h). The section does not impose a blanket Central Government approval requirement on every qualifying VRS scheme.
Can I claim leave encashment deduction from more than one employer without limit?
For non-government leave encashment within Table Sl. No. 14, subsection (2)(f) caps the aggregate deduction at the notified limit less qualifying amounts exempted or deducted in earlier years. Central and State Government employees’ qualifying receipts are addressed separately in row 13.
Need help applying this provision to your situation?
Talk to our tax team about this sectionLast updated 10 October 2026