More advantages for taxpayers and a simpler tax system are the goals of Budget 2025's revised tax structure. New income tax slabs under the new tax regime, which took effect on April 1, 2025, were put forward by Finance Minister Nirmala Sitharaman in the 2025 Union Budget. Certain tactics can still assist in reducing the tax burden even if the majority of exemptions and deductions have been eliminated when the next fiscal year, FY 2025-2026, starts on April 1, 2025, under the new tax system. In contrast to prior fiscal years, you may now take advantage of certain deductions if you want to take advantage of the new tax regime. The top tax-saving strategies in India under the new income tax slabs for FY 2025-2026 (AY 2026-2027) are listed below, based on the comments of several tax experts in India.
Top 4 Tax-Saving Strategies Under The New Income Tax Slabs
The revised tax structure in Budget 2025 aims to simplify the tax process and offer more benefits to taxpayers. To maximize savings under the new tax slabs, here are some key strategies as per Sujit Bangar Founder Taxbuddy.com
Choosing the New Tax Regime: The new tax regime offers lower tax rates across various income brackets. For individuals earning up to Rs 12 lakh, the tax burden has been reduced, making it an attractive option if you don't have significant deductions to claim under the old regime. For example, if your annual income is Rs 8 lakh, you'll pay significantly less tax under the new regime compared to the old one, where deductions such as those under Section 80C would apply, and to avail of 80C deduction, you need to spend up to Rs. 1.5 Lakhs.
Standard Deduction: Salaried individuals and pensioners can benefit from a standard deduction of Rs 75,000 under the new tax regime. This deduction directly reduces taxable income, making it beneficial for those with moderate earnings. For instance, if your taxable income is Rs 10 lakh, after applying the standard deduction, your taxable income becomes Rs 9.25 lakh, leading to lower tax liability.
Contributing to the National Pension Scheme (NPS): Under the new regime, employees can claim a deduction for the employer's contribution to the NPS, which can be up to 14% of the basic salary. This helps reduce taxable income while also contributing to retirement savings. For example, if your basic salary is Rs 5 lakh, the employer's contribution of Rs 70,000 (14% of Rs 5 lakh) can be deducted, lowering your taxable income.
Maximizing Deductions Under the Old Tax Regime: If you have significant deductions like those under Section 80C (for investments in PPF, EPF, etc.) or Section 80D (for health insurance premiums), you might want to stick with the old tax regime.
From EPF To Exemptions Allowed Under Section 10: Tax-Saving Strategies By Shefali Mundra, Tax Expert, ClearTax
1. Employer Contribution to NPS u/s 80CCD(2)
Section 80CCD(2) applies to only salaried individuals and not to self-employed individuals. The contribution made by the employer may be equal to or higher than the contribution made by the employee. The deductions under this section can be availed over and above those of Section 80CCD(1). The amount that your employer contributes will be deducted from your employee payslip and deposited into your NPS account. Section 80CCD(2) allows a salaried individual to claim the following deduction:
- Central Government or State Government Employer: Up to 14% of their salary (basic + DA)
- Any other employer: Maximum deduction of 14% of salary (basic + DA). (This 14% rate has been increased from 10% with effect from FY 2024-25)
Treatment under Old tax regime: - For Non - Governmental Employees: Maximum deduction of 10% of salary (basic + DA).
- For Governmental Employees: Maximum deduction of 14% of salary (basic + DA).
2. Amount Paid or Deposited in the Agniveer Corpus Fund under Section 80CCH(2) The Income Tax Act states that the total amount the applicants and the central government contribute to the Agniveer Corpus Fund will be eligible for deduction under section 80CCH(2).
The act also states that an exemption will be allowed if the applicant or the nominees receive such an income under the Agnipath Scheme.
Soldiers enrolled in this scheme will get all the benefits like rations, risk and hardships, travel, etc. Death and disability compensation is also available for the candidates. This deduction is now available under both regimes.
3. Deduction Under Section 57(iia) Of Family Pension Income
Family pension refers to the amount the employer pays to the employee's family in the event of the employee's death.
A sum equal to ⅓ of the income received by the employee or Rs 25,000, whichever is lower among the two, will be allowed as a deduction under section 57( iia) of the family pension - for the new regime.
Treatment under Old tax regime: The limit of Rs. 15,000 has been retained for the old regime for FY 2024-25.
4. Interest On Home Loan On Let-out Property Under Section 24
Under the new tax regime, interest on a home loan for self-occupied property is prohibited under Section 24. Whereas interest on a home loan on the let-out property is allowed as a deduction without any upper limit.
Treatment under Old tax regime: Under the old tax regime, interest on home loans under section 24 is allowed for both self-occupied and let-out properties. For self-occupied property, the maximum deduction allowed is Rs.2,00,000, whereas for let-out property, the deduction is allowed without any limit.
5. Transport Allowance and Conveyance Allowance
Transport allowance means the allowance given to the employee by the employer to compensate for the travel expenses incurred for commuting between his place of residence and work.
The exemption allowed, from FY 2018-19 onwards to the extent of Rs. 3,200 per month. However, this is applicable only for a physically challenged employee commuting from his place of residence to the place of duty.
Conveyance allowance is granted to meet the expenditure incurred during the performance of office duty. However, conveyance allowance is exempt only to the extent of actual expenditure incurred.
6. Exemptions Allowed under section 10 for the New Tax Regime
Under the new tax regime, exemptions under section 10 were not allowed. However, certain exemptions are now allowable. Let us discuss the exemptions allowed.
A voluntary retirement scheme is offered by employers so that employees can retire voluntarily. The amount exempt under this section is Rs. 5 lakh.
If individuals who receive gratuity under section 10(10) are government employees, then the gratuity received is fully exempt. Whereas if the employee is in private employment, then the exemption on the same depends on whether they are covered under the Payment of Gratuity Act.
Leave encashment is when the employee encashes all the paid leave at the time of his retirement or resignation. The maximum amount exempt has been increased to Rs. 25 lakhs as per the New Finance Bills, 2023, and the amount exceeding that will be taxable.
From Rebate Under Section 87A To Interest On EPF and PPF: Tax-Saving Strategies Under The New Tax Regime
As per Charu Pahuja , CFP CM, Group Director & COO, Wise Finserv Pvt Ltd, here are the tax-saving tips under the new tax regime. While most exemptions and deductions are not available under the new regime, there are still effective ways to save:
Standard Deduction: Rs 75,000 for salaried employees
Employer's Contribution to NPS: Up to 14% of salary (for government employees) and 10% (for private sector) is tax-exempt Interest on EPF and PPF: Still tax-free within prescribed limits
Rebate under Section 87A: If income (after standard deduction) is up to Rs 12 lakh, one pays zero tax
Interest on the home loan for a let-out property
These strategies simplify tax planning and reduce the compliance burden, especially for those who don't wish to invest just to save tax.
Top 3 Tax-Saving Strategies Under The New Income Tax Slabs
Under the new tax regime, most exemptions and deductions have been removed, but below are some strategies that can still help minimize tax liability, as per Kunal Varma, CEO and Co Founder of Freo.
Standard Deduction: Salaried individuals can claim a standard deduction of Rs 75,000, which directly reduces taxable income.
Employer Benefits: Contributions by employers to schemes like the National Pension System (NPS) may still provide some tax relief.
Annual Comparison: Taxpayers should compare the old and new tax regimes each year based on their income, deductions, and financial goals to determine the best option.
Top 2 Tax-Saving Strategies Under The New Income Tax Slabs
Standard Deduction for income from salary: Salaried individuals can claim the increased Rs.75,000 standard deduction.
Investment In NPS: Contributions to the National Pension System remain deductible. The NPS Vatsalya account is proposed to get the same tax treatment as normal NPS accounts.
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