How To Save Tax In New Tax Regime?

In the year 2023, the Government of India introduced a new tax regime. This regime had new tax slabs and a different set of guidelines. However, it did not come as a replacement to the old tax regime. Instead, the new regime was an option that taxpayers could choose instead of the old one. This regime was then updated in subsequent years.

In comparison, the new regime raises the minimum taxable income limit. This way, a large number of people do not have to worry about reducing tax. However, there were a whole host of deductions in the old regime. These deductions are not present in the new regime. For example, Section 80C and Section 80D that offer deduction in tax for the premiums you might pay for health and life insurance plans are not available in the new regime. However, there are still other ways you can save tax in the new regime.

For Salaried Individuals

• Standard Deduction: Standard deduction is one of the few things that has remained in the new regime from the old regime. Before the new regime received additional updates in the Budget 2024, you could only claim a maximum standard deduction ₹50,000. In that year, it was raised to ₹75,000. This means you can get ₹75,000 deducted from your taxable income. 
• Employer’s NPS Contribution: Contributions made by your employer to your NPS Tier-1 account qualify for deduction under Section 80CCD(2).
• Agniveer Corpus Fund: Deductions are available for contributions under Section 80CCH.
• Allowances: Exemptions continue for transport allowances for specially-abled employees, and for conveyance and daily allowances related to official duties, tours, or transfers.

For Income From House Property

• Interest On Rented Property Loans: You can claim a deduction under Section 24 for home loan interest on a let-out property. This benefit does not apply to self-occupied homes.

For Family Pension

• Family Pension Deduction: A deduction is available under Section 57(iia) for income received as family pension.

For Low-Income Earners

• Tax Rebate (Section 87A): Individuals with income up to ₹12 lakh under the new regime can claim a rebate of ₹60,000, resulting in zero tax liability for FY 2025–26.

Tips To Maximise Savings

• Structure Your Salary: Include tax-free allowances like conveyance and daily travel allowances.
• Use Employer Benefits: Opt for or increase your NPS contributions for extra deductions.
• Consider Rental Property: Interest on a let-out property loan still offers tax benefits.

Choosing Between The Old And New Regimes

Opt for the new regime if you have minimal investments under Sections 80C or 80D, few tax-exempt allowances, and income up to ₹12 lakh. 
Choose the old regime if you invest heavily in PPF, ELSS, life insurance, pay high health insurance premiums, or hold a home loan for a self-occupied property.