Save Income Tax in New Regime [VIDEO]

To Save Income Tax in New Regime, the new tax regime in India (FY 2025–26 and FY 2026-27) offers lower slab rates, a higher standard deduction of ₹75,000, and tax rebate up to ₹60,000 under Section 87A, making taxable income up to ₹12 lakh effectively tax-free. While traditional deductions like Section 80C, Section 80D, etc. are not available, tax payers can still save significantly through NPS contributions via employer, home loan interest on rented property, and other employer benefits. Also you get the benefit of marginal relief with new tax regime.

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How to Save Income Tax in New Regime

Standard Deduction: Salaried individuals can claim ₹75,000 as a flat deduction in FY 2025-26 and FY 2026-27
Rebate under Section 87A: Available for income up to ₹12 lakh, reducing tax liability to zero. So if your taxable income is below Rs. 12 Lakh, your income tax will be ZERO based on Rebate under Section 87A
Employer’s Contribution to NPS: Up to 14% of basic salary is deductible. Note that you have to ask your employer to contribute to NPS (National Pension System) on your behalf, which can be claimed under Section 80CCD(2) as Employer’s Contribution – this is deductible from your in hand salary, that can be claimed under new tax regime
Home Loan Interest (Let-Out Property): Entire interest amount can be claimed under Section 24, if the property on which the loan is taken is a let out property. For self occupied property, you cannot claim the interest amount under new tax regime
Retirement Benefits: Gratuity, leave encashment, and commutation of pension remain exempt, and you don’t have to pay any tax on these with new tax regime
Tax-Friendly Slabs: Lower slab rates automatically reduce tax compared to the old regime. Below are the mentioned tax slab rates for new regime applicable for all age groups

New Tax Regime Slab Rates (FY 2025–26 and FY 2026-27)

Below are the updated income tax slab rates for new tax regime:

Income Range (₹)	Tax Rate
0 – 4,00,000	0%
4,00,001 – 8,00,000	5%
8,00,001 – 12,00,000	10%
12,00,001 – 16,00,000	15%
16,00,001 – 20,00,000	20%
20,00,001 – 24,00,000	25%
Above 24,00,000	30%

Note that these are the reduced tax slab rates and you pay less tax compared to old tax regime. Also, you will be paying the 5% and 10% tax for income up to 12 Lakh, but if the taxable income is within 12 Lakh in FY 2025-26 or FY 2026-27, you get the tax rebate benefit under Section 87A which cancels this tax, so your net income tax will be ZERO.

What is Marginal Relief in New Regime?

Marginal Relief is the relief provided to you when your income is slightly above 12 Lakh in a financial year
For example, if the taxable income = 12 lakh, Effective Income Tax = Rs. 0 – due to tax rebate 87A. Rs. 60,000 tax (5% and 10%) saved due to this rebate
But if taxable income is Rs. 12,00,100, you will not get the benefit of tax rebate here, so tax would be Rs. 60,000 + 15% tax on Rs. 100. So just with addition of Rs. 100, you had to pay Rs. 60,000+ as income tax which is not fair.
Due to this calculation, government provides us the marginal relief, according to which you only have to pay the amount above Rs. 12 Lakh as income tax – in above case, the tax would be just Rs. 100, which is above Rs. 12 lakh
So this marginal relief helps you to save income tax when taxable income is slightly above Rs. 12 lakh

ALSO READ: Marginal Relief Explained with Video

Additional Ways to Save Tax

Reimbursements: Certain allowances like travel and food vouchers may be partially exempt.
Health Insurance Premiums (via employer): If structured as part of CTC, can be tax-efficient.
Leave Travel Allowance (LTA): Still available if employer provides it.
Retirement Corpus Planning: Opting for higher employer NPS contributions ensures long-term savings and tax benefits. Note that the maximum limit is 14% of Basic Salary that can be contributed towards NPS by Employer

Frequently Asked Questions

Can we save tax in a new tax regime?

Yes. Although deductions are limited, taxpayers save through lower slab rates, standard deduction, NPS contributions, home loan interest, and rebates up to ₹12 lakh. Apart from this, you also get marginal relief benefit on income above Rs. 12 Lakh

What deductions can be claimed in the new tax regime?

Standard deduction of ₹75,000
Employer’s contribution to NPS (up to 14% of salary)
Home loan interest on rented property (no cap)
Retirement-related exemptions (gratuity, leave encashment, pension commutation)

Is 80C allowed in the new tax regime?

No. Section 80C deductions (like ELSS, PPF, LIC premiums) are not available under the new regime. Instead, taxpayers benefit from simplified slabs and limited but impactful deductions.

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Save Home Loan Interest Amount!

Use Home Loan Excel Calculator that will help you to Save Interest Amount on Home Loan EMI.
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Income Tax Calculator App – FinCalC

For Income Tax Calculation on your mobile device, you can Download my Android App “FinCalC” which I have developed for you to make your income tax calculation easy.

What you can do with this mobile App?

Calculate Income Tax for FY 2025-26 and previous FY 2024-25
Enter estimated Investments to check income tax with Old and New Tax Regime
Save income tax details and track regularly
Know how much to invest more to save income tax
More calculators including PPF, SIP returns, Savings account interest and lot more

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