Are you navigating the New Tax Regime (NTR) and looking for ways to optimize your tax savings? Understanding the key deductions available under this system can help you significantly reduce your taxable income. Here’s a breakdown of the essential deductions you can claim under the revised tax structure.
India’s tax system offers two options:
Old Regime – Allows multiple deductions and exemptions.
New Regime – Features lower tax rates but with limited deductions.
To encourage taxpayers to opt for the NTR, the government has introduced changes in Budget 2025. Finance Minister Nirmala Sitharaman announced a revised slab rate, making income up to Rs 12 lakh tax-free under this system (excluding special rate income such as capital gains).
| Income Range (Rs.) | Tax Rate (%) |
|---|---|
| Up to 4 lakh | Nil |
| 4-8 lakh | 5% |
| 8-12 lakh | 10% |
| 12-16 lakh | 15% |
| 16-20 lakh | 20% |
| 20-24 lakh | 25% |
| Above 24 lakh | 30% |
For the financial year 2024-25 (assessment year 2025-26), the tax slabs remain as per Budget 2024:
| Income Range (Rs.) | Tax Rate (%) |
| Up to 3 lakh | Nil |
| 3-7 lakh | 5% (Tax rebate under Section 87A up to Rs 7 lakh) |
| 7-10 lakh | 10% |
| 10-12 lakh | 15% |
| 12-15 lakh | 20% |
| More than 15 lakh | 30% |
While the NTR limits the scope of deductions, taxpayers can still benefit from certain provisions to optimize tax savings. Here are three essential deductions available:
A fixed deduction applied to your total income, reducing taxable earnings. The Union Budget 2024 increased the standard deduction from Rs 50,000 to Rs 75,000, offering additional relief to salaried taxpayers.
The NPS is a government-backed retirement plan offering tax benefits under Section 80CCD(1B). Taxpayers can claim a deduction of up to 14% of their basic salary contributed to the NPS. Employer contributions remain tax-deductible.
Managed by the Employees’ Provident Fund Organisation (EPFO), the EPF ensures retirement savings for salaried employees. Employer contributions (12% of basic salary) are eligible for tax deduction under the new tax regime.
Apart from the key deductions, certain exemptions remain applicable under the new tax regime:
Transport allowances for specially-abled individuals.
Conveyance allowance for work-related travel expenses.
Compensation for work-related travel or transfers.
Daily allowances for temporary duty-related expenses.
Perquisites for official purposes.
Exemptions on voluntary retirement (Section 10(10C)), gratuity (Section 10(10)), and leave encashment (Section 10(10AA)).
Taxpayers should evaluate their income, deductions, and tax-saving investments before selecting the best tax regime. Consulting a tax expert can provide personalized advice to maximize your tax benefits and ensure compliance with the latest tax laws.
