Tax saving tips: How you can reduce tax burden under the new regime

One of the things people have to consider in their budgeting is their taxes. There are new ways to save money with the new tax regime, but it is not the same as under the old system. The new regime has a lower standard rate but it eliminates most of the exemptions and deductions. But to get the best of it, one requires a strategy.

Below are specific ideas to assist you reduce your tax bill under the new system:

• Basics of the new tax regime:

The new tax regime, introduced under the Finance Act, simplifies the tax structure by providing reduced tax slabs. However, it eliminates most exemptions and deductions, including those under Section 80C, House Rent Allowance (HRA), and others. Notably, taxpayers are not allowed to claim deductions like those for life insurance premiums, employee provident fund (EPF) contributions, or interest on home loans under this regime. The new tax system is optional; taxpayers can choose annually whether to opt for the new tax regime or continue with the old regime, based on which is more beneficial.

This system is particularly advantageous for individuals with simple income sources and minimal deductions. However, for taxpayers with more complex financial structures—such as those claiming deductions for investments or housing loans—it is advisable to carefully assess both regimes. The old regime may still be more beneficial in such cases.

An important feature under the new tax regime is that employer contributions to the National Pension Scheme (NPS) are still exempt from tax up to certain limits. Additionally, while individual contributions to NPS are not eligible for deductions under Section 80C in the new tax regime, the employer’s contribution to NPS continues to be exempt from tax, thus offering a potential tax-saving opportunity for salaried employees.

• Avail of the Standard Deduction

Under the new tax regime, salaried employees and pensioners can avail of a ₹75,000 deduction from their taxable income. This deduction is available in lieu of the ₹50,000 standard deduction that was available under the old regime.

This deduction is available automatically and does not require any additional documentation or proof, similar to the standard deduction. Make sure to account for this deduction in your computations. You may think it's small, but it can actually be the difference that knocks you off a higher tax bracket, depending on where you sit.

• Maximize Employer Perks

If your employer provides you with food, travel, or transport allowances, maximize them. Some of these allowances are tax-free up to certain limits in the new tax system.

Talk to your HR or finance department to leverage all the available benefits. These can make a huge difference to your take-home net pay.

• No tax liability under the income of  7 lakh:

The rebate  under Section 87A has been one of the most attractive features in the new tax regime. For those with incomes up to 7 lakhs, a 100% rebate is available, meaning no tax at all. 

This rebate opens up opportunities for strategic financial planning. If done right with careful management, taxable income would fall within that threshold to avoid paying one any dollar in taxes.

• Invest in Low-Cost, Tax-Efficient Instruments

Although the new tax regime eliminates deductions under Section 80C, it is still wise to invest in options that offer high returns with minimal tax implications. Public Provident Fund (PPF), tax-free bonds, and some mutual funds are examples of instruments that can still be useful.

These investments may not offer immediate tax benefits, but they remain valuable for long-term financial growth and security.

• Review Your Insurance Policies

In the old regime, insurance policies were often used as tax-saving tools. While this advantage is removed under the new system, insurance still plays a critical role in financial planning.

Instead of focusing solely on tax benefits, choose policies that provide sufficient life and health coverage. They can secure your family’s future while aligning with your broader financial goals.

• Utilize Tax Benefits on Home Loans

If you have taken a home loan for affordable housing, you can still claim the deductions on the interest paid. This is available under certain conditions in the new regime.

Check your loan details and talk to your lender to see how much you can save. You need to keep records of interest payments for you to claim this benefit.

• Keep Track of Other Eligible Expenses

While most deductions are eliminated in the new regime, there are still some exceptions. For example, the employer’s contribution to the National Pension Scheme (NPS) remains tax-exempt.

Additionally, education loans and voluntary contributions to certain pension schemes might still offer benefits. Make sure to review all eligible expenses and deductions.

• Know When to Choose the New Regime

This decision is not one-time, and your choice will be based on income, investment pattern, and changes in lifestyle.

Now, if a person has high deductions, the old system can still serve to their benefit, but for people with little claims and simple incomes, the new regime would be highly beneficial with low rates. So, this decision has to be evaluated every year for suitable decision making.

• Professional Tax Advice

The tax laws are complex and often confusing. Without professional help, mistakes may be made and chances of missing opportunities are many. A tax consultant will offer you advice that suits your specific financial situation.

At Mind Your Tax, we specialize in reducing your tax burden for ITR service in Bangalore. Our experts study your financial situation and help you choose the right tax regime.

We also ensure that all regulations are complied with, saving you time and stress during tax season. Whether salaried, a freelancer, or a business owner, we have solutions designed for maximum efficiency.

Contact Mind Your Tax for personalized advice. We have knowledgeable experts to advise you on the best monetary decisions. Visit the official website  today and initiate smarter tax planning.