How to Save Tax Under the New Regime — FY 2025-26 Guide
A common misconception is that the new tax regime means "no tax saving." That's not true. While the new regime removes most deductions like 80C (PPF, ELSS), HRA, and 80D, it still allows several powerful tax-saving avenues. More importantly, for a large group of salaried taxpayers — especially those earning under ₹15-18 lakh with limited deductions — the new regime is already the better choice before any planning.
This guide covers every legitimate tax saving tool available under the new regime in FY 2025-26.
What You CAN Claim Under the New Regime
1. Standard Deduction — ₹75,000
The standard deduction for salaried employees is ₹75,000 under the new regime (increased from ₹50,000 in Budget 2024). This is automatic — no proof needed.Impact: For someone on a ₹12L salary, this deduction alone brings taxable income to ₹11.25L, which means zero tax under the rebate (income below ₹12L gets full rebate under Section 87A).
2. Employer's NPS Contribution — Section 80CCD(2)
This is the most powerful tax saving tool in the new regime that most employees underuse.Your employer can contribute up to 10% of your Basic + DA to your NPS Tier-I account. This employer contribution is:
- Fully deductible from your taxable income
- Available under BOTH old and new regimes
- Not counted in your CTC for tax purposes (treated as perquisite but exempt)
- Basic Salary: ₹80,000/month (₹9.6L/year)
- Employer NPS (10%): ₹8,000/month = ₹96,000/year
- This ₹96,000 is deducted from your taxable income — in both old AND new regime
3. Family Pension Exemption
If you receive a family pension (pension to widow/children of deceased government/private employee), one-third of the pension or ₹25,000 (whichever is lower) is exempt under the new regime.This is a narrow provision but important for those who receive it.
4. Agniveer Corpus Fund (Section 80CCH)
Contributions to the Agniveer Corpus Fund are deductible under both regimes. Relevant only for Agniveers enrolled after 2022.5. Conveyance/Transport Allowance for Specially-Abled
For employees with disabilities, conveyance allowance up to ₹3,200/month (₹38,400/year) remains exempt.What You CANNOT Claim Under the New Regime
| Deduction | Old Regime | New Regime |
|---|---|---|
| 80C (PPF, ELSS, LIC, etc.) | ✓ Up to ₹1.5L | ✗ |
| 80D (health insurance) | ✓ Up to ₹25K/50K | ✗ |
| HRA exemption | ✓ Variable | ✗ |
| Home loan interest (Sec 24b) | ✓ Up to ₹2L | ✗ |
| 80CCD(1B) — self NPS | ✓ ₹50K extra | ✗ |
| 80E — education loan | ✓ Full interest | ✗ |
| 80G — donations | ✓ 50-100% | ✗ |
| LTA exemption | ✓ | ✗ |
Old Regime vs New Regime — Real Numbers
Let's compare for three salary profiles:
Profile 1: ₹10 Lakh Salary, Moderate Deductions
| Old Regime | New Regime | |
|---|---|---|
| Gross Salary | ₹10,00,000 | ₹10,00,000 |
| Standard Deduction | -₹50,000 | -₹75,000 |
| HRA Exemption | -₹1,20,000 | — |
| 80C (ELSS + EPF) | -₹1,50,000 | — |
| 80D (health insurance) | -₹25,000 | — |
| Taxable Income | ₹6,55,000 | ₹9,25,000 |
| Tax (incl. 4% cess) | ₹41,600 | ₹44,200 |
Old regime wins by ₹2,600. Barely.
Profile 2: ₹15 Lakh Salary, Heavy Deductions
| Old Regime | New Regime | |
|---|---|---|
| Gross Salary | ₹15,00,000 | ₹15,00,000 |
| Standard Deduction | -₹50,000 | -₹75,000 |
| HRA Exemption | -₹1,80,000 | — |
| 80C | -₹1,50,000 | — |
| 80D (self + parents) | -₹50,000 | — |
| Home Loan Interest | -₹1,50,000 | — |
| Taxable Income | ₹9,20,000 | ₹14,25,000 |
| Tax (incl. 4% cess) | ₹65,520 | ₹1,57,300 |
Old regime saves ₹91,780. Clear winner when deductions are high.
Profile 3: ₹12 Lakh Salary, Minimal Deductions (Renter, no big investments)
| Old Regime | New Regime | |
|---|---|---|
| Gross Salary | ₹12,00,000 | ₹12,00,000 |
| Standard Deduction | -₹50,000 | -₹75,000 |
| 80C (basic EPF only) | -₹72,000 | — |
| Taxable Income | ₹10,78,000 | ₹11,25,000 |
| Tax | ₹1,17,624 | ₹0 (rebate applies) |
New regime saves ₹1.17 lakh! The rebate makes new regime dramatically better here.
Strategy: Maximise Tax Saving Under the New Regime
Step 1: Confirm your employer NPS contribution
This is the single biggest lever. Restructure your salary package to include 10% of Basic as employer NPS. On a ₹12L CTC with ₹6L basic, this saves ₹60,000 in taxable income.Step 2: Check if you qualify for the ₹12L rebate
If your income after standard deduction falls at or below ₹12,00,000, your tax is zero under the new regime. This is a cliff — even ₹1 above ₹12L means you start paying tax.Step 3: Compare with old regime using actual numbers
Don't guess. Use our Income Tax Calculator with your actual salary break-up and deductions to see which regime saves more.Step 4: Declare your regime preference to HR early
Your employer deducts TDS based on the regime you declare. Declaring new regime early avoids excess TDS and hassle of refund claims.Key Numbers for FY 2025-26
- New regime standard deduction: ₹75,000
- New regime rebate ceiling: ₹12,00,000 (effectively ₹12,75,000 after standard deduction)
- Employer NPS deduction: 10% of Basic (unlimited ceiling for government employees, 10% for others)
- Health and Education Cess: 4% on tax amount
Conclusion
The new regime isn't "no tax saving" — it's "fewer deductions but a higher rebate ceiling and lower rates." For salaries under ₹12.75L with limited deductions, the new regime is often dramatically better. For salaries above ₹15L with heavy deductions (HRA + 80C + home loan), the old regime still wins.
The best approach: run both scenarios with your actual numbers before declaring your regime preference to your employer.
Compare both regimes with your actual numbers → Income Tax Calculator