New Tax Regime: 3 Deductions That Can Help Taxpayers Maximise Savings
The new tax regime, introduced as an alternative to the old tax structure, offers lower tax rates but fewer exemptions and deductions. However, there are still certain deductions available that can help taxpayers reduce their taxable income and maximise savings. Here are three key deductions to take advantage of:
1. Standard Deduction
Even under the new tax regime, a standard deduction of ₹50,000 is available for salaried individuals and pensioners. This provides automatic relief on taxable income without the need for any investment proof.
2. Employer’s Contribution to NPS
If your employer contributes to the National Pension System (NPS) on your behalf, you can claim a deduction under Section 80CCD(2). This benefit is available only to salaried employees and not self-employed individuals. The deduction is capped at:
10% of salary (Basic + DA) for private sector employees
14% of salary (Basic + DA) for government employees
3. EPF and Agniveer Corpus Fund Contributions
Under Section 80CCH, contributions made to the Agniveer Corpus Fund are deductible for eligible individuals. Additionally, employer contributions to the Employee Provident Fund (EPF) continue to remain tax-free up to a limit, helping employees save more for retirement.
Should You Opt for the New Tax Regime?
The new tax regime offers lower tax rates but eliminates most deductions available under the old system. Taxpayers should compare their tax liability under both regimes before making a choice. Those who don’t invest heavily in tax-saving instruments may find the new regime more beneficial.
By leveraging these deductions, taxpayers can still make the most of the new tax regime while minimising their overall tax burden.
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