The Indian government’s new tax regime is becoming more popular, especially after changes announced in the Union Budget 2025.
Unlike the old system that focused on multiple deductions and exemptions, the new regime is designed to be simple, with lower tax rates and fewer complications.
But here’s what many people don’t realize: you can still save tax under the new regime — if you plan smartly.
Let’s look at five key ways to reduce your tax burden.
Standard Deduction: Easy and Automatic Relief
One of the biggest benefits is the ₹75,000 standard deduction for salaried employees and pensioners (FY 2025–26).
You don’t need to invest or submit documents to claim it.
The deduction is automatic.
For middle-income earners, this alone can lower taxable income significantly — especially when combined with reduced slab rates.
Employer’s Contribution to NPS
The National Pension System (NPS) still offers tax benefits — but only for employer contributions under Section 80CCD(2).
Employers can contribute up to 10% of your basic salary plus dearness allowance.
This amount is not taxed in your hands.
If your company supports NPS contributions, this can help you save tax while building a strong retirement fund.
Zero Tax Up to ₹12 Lakh
The rebate under Section 87A has been extended.
If your taxable income is up to ₹12 lakh, you may end up paying zero tax under the new regime.
For those earning slightly above this level, smart planning — like using the standard deduction or employer NPS contribution — can help bring income within the rebate limit.
This change has made the new regime especially attractive for salaried middle-class taxpayers.
Home Loan Interest on Let-Out Property
While you cannot claim home loan interest for a self-occupied property under the new regime, there’s still a benefit for rented properties.
Under Section 24, you can claim up to ₹2 lakh per year as a deduction on interest paid for a let-out property.
If you earn rental income, this deduction can reduce your overall tax burden while supporting your real estate investment.
Retirement-Related Exemptions
Some retirement benefits still enjoy favorable tax treatment.
Gratuity, leave encashment, and employer contributions to provident funds continue to receive tax relief under specific conditions.
These are not traditional deductions, but they reduce taxable income when payouts happen — especially important for those nearing retirement.
The Bottom Line
The new tax regime focuses on simplicity and lower rates.
But that doesn’t mean tax-saving options are gone.
With the right strategy — using standard deduction, NPS employer contribution, rebate benefits, and select exemptions — taxpayers can still reduce their liability significantly.
The key is understanding the available provisions and planning accordingly.
