No Section 80C, no HRA? Here's how salaried employees can save tax under New Tax Regime

The New Income Tax regime has emerged as the preferred choice for many salaried taxpayers, thanks to lower tax rates and a simplified structure. While the regime does away with several popular deductions available under the old system, experts say there are still a number of ways employees can legally reduce their tax burden.

What remains available under the new tax regime?

One of the biggest benefits that continues under the new regime is the standard deduction of ₹75,000, available to salaried individuals and pensioners without the need to submit any investment proof or supporting documents.

The government has also provided relief through a tax rebate of up to ₹60,000 for resident individuals whose taxable income does not exceed ₹12 lakh, making income up to this threshold effectively tax-free in many cases.

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Can NPS and EPF contributions help?

Yes, but with limitations.

Under the new tax regime, an employee's own contribution to the National Pension System (NPS) is not eligible for deduction. However, the employer's contribution to NPS can be claimed as a deduction, subject to a limit of 10% of salary (basic pay plus dearness allowance).

Similarly, the employer's contribution to the Employees' Provident Fund (EPF) remains tax-exempt. However, if the combined annual contribution to the Recognised Provident Fund (RPF), NPS and approved superannuation fund exceeds ₹7.5 lakh, the excess amount is treated as a taxable perquisite.

What about home loan benefits?

The new regime does not permit deductions on housing loan interest for self-occupied properties. However, taxpayers earning rental income from a let-out property can still claim interest deductions against that rental income.

Any loss arising from such deductions cannot be adjusted against income under other heads and can only be set off against income from the same property.

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Are gifts and employee perks tax-efficient?

Certain employer-provided benefits continue to enjoy tax exemptions.

Gifts, vouchers or coupons given by employers are exempt up to ₹5,000 a year, beyond which the entire amount becomes taxable. From FY 2026-27, this exemption limit has been increased to ₹15,000.

Cash gifts, however, remain fully taxable.

Employees can also benefit from tax-free reimbursements for official telephone, mobile and internet expenses, provided they are used for work purposes and supported by bills. Laptops and computers supplied by employers for official use are also tax-efficient benefits.

What is changing for meal cards?

Employer-provided meal cards such as Sodexo and Zaggle can offer additional tax savings.

From FY 2026-27, the exemption limit has been increased to ₹200 per meal, compared with ₹50 earlier, subject to prescribed conditions. However, for FY 2025-26, this benefit is available only under the old tax regime and not under the new regime.

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Is there any relief for family pensioners?

Yes. Legal heirs receiving family pension can claim a deduction equal to the lower of one-third of the pension received or ₹25,000 annually, reducing their taxable income.

Tax slabs comparison

The income tax slabs under the old and new regimes are designed to balance disposable income and long-term savings, giving taxpayers the flexibility to choose the system that suits them best.

New Tax Regime    Tax Rate

Up to ₹4 lakh    Nil
₹4 lakh – ₹8 lakh    5%
₹8 lakh – ₹12 lakh    10%
₹12 lakh – ₹16 lakh    15%
₹16 lakh – ₹20 lakh    20%
₹20 lakh – ₹24 lakh    25%
Above ₹24 lakh    30%

Old Tax Regime    Tax Rate

Up to ₹2.5 lakh    Nil
₹2.5 lakh – ₹5 lakh    5%
₹5 lakh – ₹10 lakh    20%
Above ₹10 lakh    30%

One should note that senior citizens aged 60-80 years enjoy a basic exemption limit of ₹3 lakh under the old regime, while super senior citizens aged 80 years and above have an exemption limit of ₹5 lakh.

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Rebate Under Section 87A

Section 87A of the Income Tax Act provides a tax rebate to resident individuals whose total income does not exceed ₹5 lakh under the old tax regime or ₹12 lakh under the new tax regime for FY2025-26. Eligible taxpayers can claim a rebate of up to ₹12,500 under the old regime and up to ₹60,000 under the new regime, effectively reducing their income tax liability to zero.

                                              New Tax Regime    Old Tax Regime

Maximum rebate available    Up to ₹60,000    Up to ₹12,500
Income effectively tax-free    Up to ₹12 lakh    Up to ₹5 lakh

Bottom line

Although the new tax regime has significantly curtailed traditional deductions such as Section 80C investments, HRA and medical insurance premiums, it still offers several avenues for tax savings. By understanding the available exemptions, employer-sponsored benefits and pension-related provisions, salaried taxpayers can optimise their tax liability while enjoying the simplicity that the new regime promises.

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