How to Save Tax in New Tax Regime: Smart Strategies for FY 2025-26

Indian taxpayers have largely switched to the new tax regime by FY 2025-26. The fact that one can earn up to ₹12 lakh tax-free through rebate under the new tax system has led many salaried employees to wonder: Is it possible to save tax in the new tax regime without conventional 80C investments? 

The solution is to learn about the few deductions, exemptions, and allowances that are still there in this new, simpler tax system. Here we show how you can cut your tax bill with the right choices of deductions and exemptions under the current new tax regime regulations for FY 2025-26.

Is There Any Way to Save Tax in the New Tax Regime?

Absolutely Yes! Despite the new tax system being cut down to almost no tax-saving options at one stage, it still offers several ways to save tax. So, in the absence of deductions under sections 80C, 80D and HRA, your taxable income can still be reduced by using some provisions.

List of Allowed Tax-Saving Provisions

1. Standard Deduction (₹75,000) – Automatically available to salaried employees and pensioners. This flat deduction directly lowers your gross salary.
2. Employer’s NPS Contribution (Section 80CCD(2)) – If your employer contributes to your NPS account (up to 14% of basic salary), that amount is fully deductible.
3. Home Loan Interest for Let-out Property (Section 24(b)) – No upper limit on interest paid for a property that is rented out (including to family members at market rent).
4. Agniveer Corpus Fund (Section 80CCH) – Contributions to this fund by Agniveers are eligible for deduction.
5. Family Pension Deduction – Lower of ₹25,000 or one‑third of the family pension received.
6. Section 87A Rebate – If your net taxable income (after deductions) does not exceed ₹12 lakh, you get a 100% rebate, making your tax zero.

These provisions prove that the usual taxpayer’s concern on “how to reduce tax in the new regime” is not a myth – it simply requires focusing on the right components.

Income Tax Slab Rates and Standard Deduction for FY 2025-26

Being aware of slab rates is a fundamental step in tax planning. The new system implies lesser rates while at the same time, quite limited deductions. The standard deduction of ₹75,000 gives an extra benefit to the salary earners.

New Tax Regime Slab Rates (FY 2025-26)

Standard Deduction Benefit

The standard 75,000 is deducted from the gross salary without your intervention. Consider the situation when your salary is 12.75 lakh and after standard deduction your taxable income will be 12 lakh – after applying Section 87A rebate, your tax liability is zero. This single feature is generally the biggest solution on how to save tax in the new tax regime.

How to Save Tax in New Tax Regime for Salaried Employees

About the amount of convenience that a salaried person gains from the new tax system, that can hardly be beat. Besides the usual deduction, a salary can be restructured and the various allowances paid can be claimed.

Salary Structuring and Employer NPS

Ask your employer for an additional share to be deposited in your NPS account from their side under Section 80CCD(2). The employer contribution can be as high as 14% of basic salary and it has no taxation in your hands at all, i.e. it is 100% tax-free. Suppose a person has a basic pay of ₹15 lakhs; in such a case, maximum deduction could be as high as ₹2.1 lakhs which is a hefty tax saving! This is one of the strongest ways to reduce tax in new regime.

Exempt Allowances Still Available

As HRA and LTA are not there anymore, some allowances still remain unchanged and exempted:

• Conveyance allowance for official travel
• Telephone and internet reimbursements (actual bills)
• Travel allowance for tours/transfers (subject to actual expenditure)
• Transport allowance for specially abled persons (₹3,200 per month)

You can ask the HR to convert your taxable perks into these allowances that require the submission of the proper bills.

Which Savings Are Allowed in the New Tax Regime?

Most investors think that no savings can be done under the new regime. Although employee contributions to PPF, ELSS, or SCSS are not deductible, the employer-linked and government-specified schemes do still count.

Eligible Investments and Deductions

• Agniveer Corpus Fund – for those serving in the armed forces under this scheme.
• Senior Citizen Savings Scheme (SCSS) – interest is taxable, but no deduction for investment; however, the scheme itself is allowed as a savings product (though without upfront tax benefit).

Note: Do not trust resources stating that PPF or SCSS contributions are deductible – these are not under the new tax regime.Employer NPS contribution (as covered above) – the only major investment‑linked deduction.

The key message: concentrate on employer-side contributions rather than your own investments if you want to know how to save tax effectively.

Which Section 10 Exemptions are Allowed in the New Tax Regime?

The difference between exemptions and deductions is that exemptions exclude certain income from the gross total income. There are several Section 10 exemptions still available.

Retirement Benefits Exemptions

• Gratuity (Section 10(10)) – Exempt up to ₹20 lakh for non‑government employees; fully exempt for government employees.
• Leave Encashment (Section 10(10AA)) – Exempt up to ₹25 lakh for non‑government employees; fully exempt for government staff.
• Voluntary Retirement Scheme (VRS) compensation (Section 10(10C)) – Exempt up to ₹5 lakh.

Other Exemption List

• Gifts from relatives or on marriage – fully exempt (no limit for specified relatives; up to ₹50,000 from others).
• Scholarships (Section 10(16)) – fully exempt.
• Government awards (Section 10(17)) – fully exempt.

What is NOT exempt?

• HRA
• LTA
• children education allowance
• most standard allowances

So when planning how to get tax exemption in new regime, stick to retirement benefits and genuine reimbursements.

How to Save Tax in the New Tax Regime Using a Calculator

An online tax calculator is certainly the best way to find out your tax liability under old vs. new regimes and estimate your tax payment.

Steps to Use an Online Tax Calculator

1. Enter your gross salary and other income (interest, rental income, etc.).
2. Input eligible new regime deductions – standard deduction, employer NPS contribution, home loan interest on let‑out property, family pension, Agniveer fund.
3. Select the new regime – most calculators will default to it for FY 2025-26.
4. View tax payable – the calculator applies slab rates and automatically checks Section 87A rebate.
5. Compare with the old regime – many calculators show both side by side.

Why Foxtax Can Help You Maximise Your Tax Savings

Sometimes, understanding the fine print of the new tax regime can be extremely daunting – especially when one has to decide between the old and new regimes or restructure his/her salary. Foxtax provides tax planning services led by experts and highly personalised for Indian salaried employees, freelancers, and senior citizens.

Expert Guidance for New Regime Tax Planning

Certified experts of Foxtax examine your entire income giving structure, pick up every deduction eligible (including the ones people often miss, such as employer NPS or let-out property interest), and do the calculation for old vs. new regime. They assist you in talking to your HR for the restructuring of allowances and maximising reimbursements, thus you pay the lowest legal possible tax. Foxtax will never leave you to wonder how to reduce tax in the new regime. You shall get a tailor-made roadmap along with support throughout the year for ITR filing.

Quick Glance: Key Tax-Saving Strategies for New Regime

• Claim ₹75,000 standard deduction – automatic for salaried/pensioners.
• Maximize employer NPS contribution up to 14% of basic salary.
• Convert taxable perks into exempt reimbursements (phone, internet, and conveyance).
• If you own a let-out property, deduct unlimited home loan interest.
• Use Section 87A rebate – make sure taxable income is ≤ ₹12 lakh to pay zero tax.
• Claim retirement benefits (gratuity, leave encashment, VRS) within exemption limits.
• Run a tax calculator before deciding between the old and new regimes each year.

These seven measures are the direct answers to how to save tax in the new tax regime for most Indian taxpayers.

Conclusion

The new tax regime is not really the deduction-less wasteland type as some claim. The ₹75,000 standard deduction, employer NPS contributions, unlimited home loan interest on let-out property and the staggering Section 87A rebate (making ₹12 lakh income tax-free) are your strong allies in cutting down your tax bill. 

The fundamental thing lies in understanding what is permissible and then accordingly restructuring your salary. Foxtax can be your partner at every step of this journey – from comparing regimes to filing ITR – guaranteeing that you never miss out on a legal saving. Don’t delay your tax planning – it’s your right to keep more of your hard-earned money.

FAQ Section

Q1: Which section 10 exemptions are allowed in the new tax regime?

Exemptions like gratuity under section 10(10), leave encashment under 10(10AA), VRS compensation under 10(10C), scholarships under 10(16), and government awards under 10(17) are permitted. HRA (10(13A)) and LTA however are not permitted.

Q2: How to save tax in new tax regime for senior citizens?

Besides the standard deduction of ₹75,000 (if salaried/pensioner), senior citizens can also take the family pension deduction (₹25,000 or 1/3 of pension). Additionally, the Section 87A rebate is applicable for income up to ₹12 lakh, thereby income up to ₹12.75 lakh being tax-free after standard deduction.

Q3: How to save tax in new regime while filing ITR?

When filing ITR, (use ITR-1 or ITR-2), pick new regime (default). Put in eligible deductions in Schedule 80CCD(2) for employer NPS, Schedule 24 for let-out property interest, and Schedule 57 for family pension. Do not claim 80C, 80D, or HRA. Claim Section 87A rebate if applicable.

Q4: What do Reddit discussions say about saving tax in the new regime?

Some tips shared on r/IndiaTax include convincing employers to increase the NPS component, convert perks into reimbursements, and using let-out property (even rented to a relative) for claiming unlimited interest deduction. According to a number of members, the new regime is mainly good up to an income of ₹15 to ₹20 lakh and for persons with very few traditional investments.

Q5: Is the new tax regime better than the old regime for me?

It is a matter of your personal situation. If you do have 80C/80D investments in a big way, HRA, or home loan principal, the old regime could still be the best for you. See a tax calculator and see for yourself by inputting your figures.