The New Tax Regime has become the preferred tax system for many salaried individuals after the government introduced lower tax rates and simplified tax slabs. However, one common complaint among taxpayers is that the new system offers fewer deductions and exemptions compared to the old tax regime.
Under the previous tax structure, taxpayers could reduce their tax burden through multiple deductions such as Section 80C investments, HRA benefits, medical insurance under Section 80D, home loan interest, Leave Travel Allowance (LTA), and several other exemptions. Most of these benefits are either limited or unavailable under the new tax regime.
Despite this, tax-saving opportunities have not disappeared completely. Financial experts say that salaried employees can still lower their tax liability through careful salary planning, smart financial decisions, and proper tax calculations.
The government has also provided major relief to the middle class in Budget 2025 by making annual income up to ₹12.75 lakh tax-free under certain conditions in the new tax regime.
If you are planning to file your Income Tax Return (ITR) for FY 2025-26, here are five important ways to legally save tax even under the New Tax Regime.
1. Use Meal Vouchers and Food Benefits Smartly
One of the easiest ways salaried employees can reduce their taxable income is through meal vouchers or food coupons offered by employers.
Many companies provide food benefits as part of the salary package. Even under the new tax regime, these meal-related benefits may help lower the overall tax burden to some extent.
Employees should carefully check whether their employer offers:
- Meal cards
- Digital food coupons
- Cafeteria reimbursement
- Corporate food allowance
Structuring salary components properly can help maximize savings without violating tax rules.
2. Take Advantage of Employer Contribution to NPS
The National Pension System (NPS) continues to remain one of the few major tax-saving options available under the new regime.
Under Section 80CCD(2), the employer’s contribution to the employee’s NPS account qualifies for tax benefits even in the New Tax Regime.
This makes NPS an important tool for salaried individuals looking to save tax while also building retirement savings.
If your company offers NPS contributions as part of the compensation structure, opting for this facility could significantly reduce taxable income.
3. Always Compare Old and New Tax Regimes
Many taxpayers automatically select the New Tax Regime without comparing it properly with the old system.
However, tax experts warn that every individual’s income structure, deductions, investments, and financial goals are different. Because of this, the better option can vary from person to person.
Before finalizing your tax regime, it is important to calculate total tax liability under both systems.
The Old Tax Regime may still prove beneficial for individuals who claim large deductions such as:
- HRA exemption
- Section 80C investments
- Medical insurance under Section 80D
- Home loan interest deduction
- Education loan benefits
Meanwhile, the New Tax Regime may work better for people who do not use many deductions.
4. Inform Your Employer Early About Your Chosen Tax Regime
Tax professionals advise employees to inform their employer about their preferred tax regime at the beginning of the financial year or while joining a new company.
This helps companies deduct the correct amount of Tax Deducted at Source (TDS) from monthly salaries.
If the wrong tax regime is selected initially, employees may face problems such as:
- Excess tax deduction
- Lower in-hand salary
- Refund delays during ITR filing
Proper planning at the start of the year can prevent unnecessary complications later.
5. Recalculate Tax Before Filing ITR
Experts also recommend recalculating tax liability once again before submitting the Income Tax Return.
Many employees experience changes in salary, bonuses, investments, incentives, or other income sources during the financial year. Because of this, the final tax liability may differ from earlier estimates.
Before filing the return, taxpayers should compare both tax regimes once more and choose the option that results in lower total tax liability.
This simple step can help avoid overpayment of taxes and improve refund calculations.
What Tax Benefits Are Still Available in the New Tax Regime?
Although the new system offers fewer exemptions, several important benefits are still available.
Key Exemptions and Benefits Under the New Tax Regime
- Standard deduction of ₹75,000 for salaried employees and pensioners
- Tax benefit on employer contribution to NPS
- Deduction on family pension
- Tax relief on leave encashment
- Certain transport allowances remain tax-free
- Selected deductions linked to house property
- Gratuity up to ₹20 lakh remains tax-exempt on retirement
- VRS benefits up to ₹5 lakh remain tax-free
- Gifts up to ₹50,000 in a financial year remain exempt under conditions
These benefits can still help taxpayers reduce their overall tax burden significantly.
Which Tax Regime Is Better?
There is no single answer to this question because the ideal tax regime depends entirely on an individual’s financial profile.
Old Tax Regime May Be Better If You Have:
- High HRA claims
- Large 80C investments
- Home loan interest deductions
- Medical insurance deductions
- Multiple tax-saving investments
New Tax Regime May Be Better If You:
- Have fewer deductions
- Prefer simplified tax filing
- Want lower slab rates
- Do not invest heavily in tax-saving instruments
Experts advise taxpayers to calculate total tax under both systems before making the final decision.
Important Precautions While Filing ITR
Tax experts also warn that taxpayers should not blindly rely on pre-filled ITR forms provided by the Income Tax Department.
Even though many details are auto-filled, the responsibility of submitting accurate information still lies with the taxpayer.
Before filing your return, carefully verify:
- Salary details
- TDS entries
- Bank interest income
- Investment information
- Deduction claims
- Capital gains, if any
Incorrect or incomplete information may lead to notices, penalties, or delays in refund processing.
Final Word for Taxpayers
The New Tax Regime may appear restrictive at first glance, but salaried individuals still have several opportunities to reduce tax liability through smart planning and correct salary structuring.
As the ITR Filing 2026 season approaches, taxpayers should compare both tax systems carefully, calculate liabilities properly, and choose the option that provides maximum savings and long-term financial benefit.
Disclaimer: This article is meant only for informational purposes. Tax laws and exemptions may change over time. Taxpayers should consult a qualified financial advisor or tax expert before making financial decisions or filing income tax returns.
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