Reducing taxable income under the new tax regime (FY 2025-26) is limited to specific deductions rather than broad investments. Key methods include a ₹75,000 standard deduction for salaried individuals, employer contributions to NPS (Sec 80CCD(2)), interest on home loans for rented property, and specific allowances for travel or transfers.
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Postponing the sale of highly appreciated stock to avoid a large capital gain. Delaying the exercise of nonqualified stock options. Maximizing your 401(k) and health savings account contributions to reduce your current-year MAGI. Holding off on large Roth conversions.
Rebate is a tax reduction available to resident individuals when they earn income within 10% tax slab. Under the new regime, a rebate of Rs.60,000 is allowed for an income up to Rs. 12 lakhs. Under the old regime, a rebate of Rs. 12,500 is allowed for an income up to Rs. 5 lakhs.
The new regime offers lower rates of taxes but permits limited deductions and exemptions.
How to Save Tax in India? 10 Smart and Legal Ways for FY 2025-26
Ans: This tax regime was introduced in budget 2020, offers lower tax rate but without the ability to claim deductions and exemptions except for NPS & EPF contribution. Standard Deduction of INR 75,000 for salaried individuals and pensioners (from FY 2024-25).
2) Act, 2024 increased the amount of standard deduction from the existing Rs. 50,000 to Rs. 75,000 in a case where the assessee-employee computes the income tax under the new (default) tax regime prescribed under Section 115BAC(1A)(ii). Accordingly, this will apply to assessment year 2025-26.
Let us check how the NPS in new tax regime can compare against other popular financial products.
Key Takeaways. High earners are taxed at higher marginal rates, but proactive planning can significantly reduce taxable income. The most effective strategies combine retirement contributions, tax-advantaged accounts, and income-timing decisions rather than relying on a single tactic.
Maximize Your Refund or Minimize Your Tax Liability with These Practical Tips
Ways to Save Tax under New Tax Regime FY 2025-26
According to a distributional analysis from the nonpartisan Joint Committee on Taxation—which previously estimated the tax bill provides more than $600 billion in new tax relief to middle-class households—the largest proportional tax benefits go to workers and families making less than $50,000.
Rebate Limits for Each Year:
FY 2023-24 (AY 2024-25) onwards: As per the new tax regime, the rebate limit was changed to ₹25,000 for those with taxable income up to ₹7 lakh. Meanwhile, the old tax regime remained the same at ₹12,500 for those with an income of up to ₹5 lakh.
The new tax regime allows salaried people and senior citizens earning pensions a standard deduction of ₹75,000. Family Pension: If you have a family pension income, the new regime offers a deduction for it. You can claim a deduction of ₹25,000 or one-third of the pension amount, whichever is lower.
The Union Budget 2025 introduced a major income tax relief for the middle class – making annual incomes up to ₹12 lakh completely tax-free* under the new regime. This means if your taxable income is ₹12 lakh or less, you owe zero tax* for the year.
Note that the new tax regime has removed nearly 70 tax deductions that were earlier allowed in the old regime. For example, you can not claim tax-saving benefits on expenses related to medical insurance premiums under Section 80D and deductions up to ₹1.5 Lakh under Section 80C in new tax regime.
There are a few new tax regime deduction options that help you save taxes in the new tax regime, so let's look at them.
Here's a summary of key changes for the 2025 tax year. The seven federal tax brackets (10%, 12%, 22%, 24%, 32%, 35%, 37%) are now permanent. Standard deductions increased, plus a new “bonus” deduction for older adults. Child tax credit increased to $2,200 per qualifying child.