How to Save Tax in New Tax Regime
A question that crosses the mind of almost every salaried individual is - "Is there any real tax saving possible in the new tax regime?" The answer is: Yes, you absolutely can save tax in the new regime - but the approach has changed. The old methods like Section 80C, 80D, or HRA exemption no longer work the same way. You need smarter, more strategic moves. Whether you are a salaried employee, a freelancer, or a small business owner, this guide will walk you through everything you need to know about tax saving in the new regime - in simple, plain language. No jargon. No confusion.
Key Features of the New Tax Regime
Lower Tax Slab Rates
The new tax regime offers reduced tax rates across all income levels, making it more affordable for most taxpayers.
Standard Deduction of ₹75,000
Salaried individuals can claim a flat ₹75,000 deduction from their income, reducing taxable income.
Default Tax Regime
The new tax regime is automatically applied unless you choose to opt for the old regime.
Rebate Under Section 87A
You pay zero tax if your income is up to ₹7 lakh (effectively ₹7.75 lakh for salaried individuals after standard deduction).
NPS Employer Contribution Deduction
Employer contributions to NPS are still eligible for tax deduction under Section 80CCD(2).
Family Pension Deduction
A deduction of ₹25,000 or one-third of the pension (whichever is lower) is allowed on family pension income.
No HRA Exemption
House Rent Allowance (HRA) benefits are not available under the new tax regime.
No Section 80C, 80D, 80G Deductions
Popular deductions like investments, insurance, and donations are not allowed.
No LTA Exemption
Leave Travel Allowance (LTA) benefits cannot be claimed under this regime
No Home Loan Interest Deduction
Interest on home loans for self-occupied property (Section 24b) is not deductible.
New vs Old Tax Regime
Who Should Choose the New Tax Regime?
Ideal for Young Professionals
Best suited for individuals early in their careers with minimal investments and deductions.
Perfect for Income up to ₹7.75 Lakh
You can pay zero tax due to standard deduction and Section 87A rebate benefits.
No Major Deductions or Investments
Works well if you don’t claim HRA, home loan interest, or Section 80C deductions.
Simple and Hassle-Free Filing
No need to manage multiple proofs, making income tax filing quick and easy.
Suitable for Freelancers & Consultants
Ideal for professionals without salary-based benefits like HRA or LTA.
Beneficial with Employer NPS Contribution
You can still claim tax benefits on employer contributions to NPS under Section 80CCD(2).
Smart Strategies for Tax Saving in New Tax Regime
Standard Deduction - Don't Miss ₹75,000
From FY 2024-25, salaried individuals get a flat ₹75,000 deduction automatically, reducing taxable income without any proof or investment.
Employer NPS Contribution - Section 80CCD(2)
Employer contributions to NPS (up to 10% of salary, 14% for govt employees) are deductible in the new regime, helping you save tax without extra investment.
Salary Restructuring - The Real Game Changer
Restructuring your salary with components like meal allowance, reimbursements, and PF can reduce taxable income before deductions apply.
Gratuity, PF & Other Exempt Incomes
Certain incomes like PF contribution, gratuity, and VRS proceeds remain tax-free, so they should not be included in taxable income.
Capital Gains Strategy - Harvest Losses
Using tax-free LTCG limits and loss harvesting can legally reduce capital gains tax under the new regime.
Home Loan on Let-Out Property
While interest deduction isn’t allowed for self-occupied homes, it can still be adjusted against rental income for let-out properties.
Real-Life Example -Tax Calculation in New Regime
Tax Calculation (New Regime FY 2025-26)
Latest Updates for FY 2025-26
Zero tax up to ₹12 lakh
Income (for resident individuals) - under the revised Section 87A rebate proposed in Budget 2025
For salaried individuals
With ₹75,000 standard deduction, effectively zero tax up to ₹12.75 lakh
New tax slabs revised
Making mid-income earners (₹8L-₹15L) significantly better off
New regime remains default
Old regime requires explicit opt-in while filing
Revised New Regime Slabs (FY 2025-26)
Common Mistakes to Avoid
Assuming zero tax = zero planning
Even if you fall under ₹7.75 lakh, plan your salary structure for higher income years.
Not asking employer for NPS contribution
This single step can save ₹10,000–₹30,000/year.
Ignoring Form 16 breakdown
Many employees don't check if standard deduction is correctly applied.
Switching regime without calculating
Use the Income Tax Department's online calculator before deciding.
Freelancers not claiming business expenses
Freelancers can still deduct genuine business expenses (internet, software, travel) as business expenses under PGBP head - regime doesn't affect this.
Missing the 87A rebate
If your net taxable income is ≤ ₹7 lakh, your tax = ₹0. Many people still pay advance tax unnecessarily.
FAQs
Conclusion
The new tax regime isn't about doing less - it's about doing things differently. Gone are the days of scrambling for 80C proofs in March. The new approach is cleaner, smarter, and more strategic.
To maximize tax saving in new regime:
Claim your ₹75,000 standard deduction always.
Request employer NPS contribution restructuring.
Review your salary components for tax-friendly perquisites.
Harvest capital losses before March 31.
Compare both regimes every year - don't auto-pilot.
Tax planning isn't a one-time activity. It's a year-round discipline. Start today, and keep more of what you earn - legally and smartly.
Still Confused About Which Tax Regime is Right for You?
Let the experts at StartupFlora review your income structure and help you make the smartest tax decision - legally and confidently.
We help salaried individuals, and small business owners with:
Tax Regime Selection (New vs Old)
Salary Restructuring Guidance
Business Compliance & Tax Planning
End-to-End Business Consultancy
Book a Free Consultation with StartupFlora Today