Save Tax Even in the New Regime: TaxBuddy Strategies
- Bhavika Rajput
- 6 hours ago
- 9 min read
The new income tax regime in India offers simplified tax slabs with lower rates but removes most traditional exemptions and deductions. Despite this, taxpayers can still strategically reduce their tax liability by leveraging available deductions like standard deduction, employer contributions to NPS, home loan interest, and certain business incentives. Choosing the right approach, optimizing income classification, and using AI-powered tools like TaxBuddy can help maximize savings even under the new regime. With real-time updates, guided filing, and automated calculations, TaxBuddy ensures accurate, efficient, and compliant tax management tailored for salaried, freelance, or business incomes.
Table of Contents
Understanding the New Tax Regime
The New Tax Regime is designed for taxpayers who prefer lower tax rates over multiple exemptions. Unlike the old regime, taxpayers under this system forgo most deductions such as standard deduction, HRA exemption, and Section 80C investments. However, certain allowances like employer contributions to NPS (Section 80CCD(2)) and specified deductions under Sections 80JJAA are still applicable. Choosing this regime requires analyzing whether foregoing exemptions results in overall tax savings compared to the old regime.
Key Tax-Saving Strategies Under the New Regime
The new tax regime offers lower tax rates but significantly reduces the availability of deductions and exemptions compared to the old regime. Despite these limitations, taxpayers can still adopt several strategies to minimize their overall taxable income and optimize tax savings. One of the most effective strategies is to prioritize eligible deductions that remain available under the new regime. For instance, contributions to the National Pension System (NPS) continue to qualify for deductions under Section 80CCD(1B), allowing individuals to reduce their taxable income by up to ₹50,000 in addition to the standard 80C limit.
Another opportunity lies in deductions related to employment generation under Section 80JJAA, which is particularly beneficial for businesses and startups hiring new employees. Taxpayers should also focus on optimizing employer-provided allowances that are still permitted, such as conveyance allowances or certain performance-linked incentives, as these can lower the taxable salary component.
Strategic salary structuring plays a vital role as well. By planning components such as basic salary, allowances, and reimbursements carefully, individuals can ensure that their taxable income remains minimized while remaining compliant. Additionally, investing in instruments specifically allowed under the new regime, like certain NPS options or government savings schemes, can provide incremental tax relief.
Finally, before finalizing ITR filing, it is crucial to compare the total tax liability under both the old and new regimes. While the new regime may appear attractive due to lower rates, the old regime might still provide greater benefits if the taxpayer has substantial deductions or exemptions. Conducting this comparison ensures that the filing choice is optimized for maximum tax efficiency, avoiding unnecessary overpayment.
Employer Benefits Optimization: Is It Allowed in New Tax Regime?
Even under the new tax regime, certain employer-provided benefits remain allowable and can help employees reduce their taxable income. Contributions made by the employer to recognized retirement schemes, including the Employee Provident Fund (EPF) and the National Pension System (NPS), continue to be exempt from tax up to the prescribed limits. This ensures that taxpayers can still benefit from long-term retirement savings while complying with the new tax rules. Other allowances and perks, such as house rent allowance (HRA), conveyance allowance, and leave travel concession, are no longer deductible under the new regime. Therefore, it is important for taxpayers to structure their salary carefully with their employers to take advantage of the benefits that remain exempt. Reviewing the salary components and ensuring that contributions to permissible schemes are maximized can lead to significant tax savings without violating the new tax rules.
Standard Deduction: How It Works in the Old vs New Regime
In the old tax regime, salaried employees automatically enjoy a standard deduction of ₹75,000, which directly reduces their taxable income. This deduction is simple and applies regardless of other expenses, helping reduce the overall tax liability. On the other hand, the new tax regime does not allow this standard deduction, which means the gross salary is considered taxable income unless specific deductions or exemptions allowed under the regime are claimed, such as employer contributions to NPS or recognized retirement schemes. Consequently, taxpayers under the new regime must carefully assess their total income and permissible deductions to calculate their accurate tax liability. Comparing tax calculations under both the old and new regimes can help employees determine which option is more tax-efficient based on their salary structure, allowances, and investment patterns, enabling strategic financial planning.
Home Loan Interest and Rental Property Deductions
Under the new tax regime, the scope for claiming deductions related to home loans and rental properties has been significantly reduced compared to the old regime. Specifically, interest paid on home loans for self-occupied properties is no longer eligible for deduction. In contrast, under the old regime, Section 24(b) allowed taxpayers to claim a deduction of up to ₹2 lakh per year on the interest component of a home loan for a self-occupied property. This change impacts individuals who rely on home loan interest deductions to reduce their taxable income.
Similarly, for taxpayers earning rental income from let-out properties, deductions for property maintenance, municipal taxes, and other expenses are now limited or unavailable under the new regime. As a result, the net taxable rental income may increase compared to the old regime, potentially leading to higher tax liability. Taxpayers who wish to maximize benefits from home loan interest or rental property-related deductions may find the old regime more advantageous, depending on their overall income and investment portfolio.
Section 80CCD(2) and Voluntary NPS Contributions
Contributions made by employers to the National Pension System (NPS) under Section 80CCD(2) continue to remain fully exempt from tax under the new regime. This exemption allows employees to benefit from a reduction in taxable income without affecting their cash flow, as employer contributions are not included in their taxable salary.
Additionally, taxpayers can make voluntary contributions to the NPS under Section 80CCD(1B), which offers an additional tax benefit of up to ₹50,000 beyond the standard Section 80C limit. Strategically planning NPS contributions can help reduce overall taxable income while building long-term retirement savings. Combining employer contributions with voluntary contributions enables individuals to optimize tax benefits and simultaneously secure financial stability for retirement, making NPS a valuable tool for both tax planning and future wealth accumulation.
Section 80JJAA: Deduction on Employment Generation
Section 80JJAA offers deductions to companies or businesses generating new employment. The deduction covers 30% of additional employee salaries for three assessment years, providing an opportunity for businesses to reduce taxable income while expanding workforce. This deduction is allowed under the new tax regime and serves as a key tax-saving strategy for eligible employers.
Strategic Investment Choices and Income Classification
Even within the constraints of the new regime, careful planning of investments and income classification can reduce tax liability. Income from capital gains, long-term savings schemes, and eligible allowances can be structured to minimize taxable income. Taxpayers should evaluate the impact of investment decisions on overall tax calculations to achieve optimal savings.
Practical Tips to Maximize Tax Savings
Maximizing tax savings under the new tax regime requires careful planning and awareness of the allowances and deductions still available. Even though the new tax regime offers lower tax rates, many exemptions and deductions are no longer applicable. Taxpayers should first focus on deductions that remain allowed. For instance, contributions to the National Pension Scheme (NPS) under Section 80CCD and deductions under Section 80JJAA for new employees hired by businesses can still be claimed. Prioritizing these deductions can reduce taxable income significantly.
Optimizing the salary structure is another effective strategy. Taxpayers should ensure that all permissible employer-provided benefits, such as leave travel allowances, conveyance, or professional development allowances, are correctly structured to reduce taxable income without violating regulations.
It is also important to compare the total tax liability under both the old and new tax regimes before filing. Some taxpayers may find that the old regime, with its available exemptions and deductions, results in lower tax liability depending on their income and investments. Maintaining accurate records of all eligible deductions, investments, and expenses is crucial for ensuring smooth processing of returns and avoiding unnecessary scrutiny or notices from the Income Tax Department.
Finally, leveraging digital platforms like TaxBuddy can make the process easier. Platforms like TaxBuddy provide automated checks, guidance on eligible deductions, and a seamless filing experience, helping taxpayers identify the most effective strategies to minimize tax liability while staying compliant.
How TaxBuddy Helps Maximize Tax Savings
TaxBuddy offers a comprehensive solution to maximize tax savings, particularly under the new tax regime, by streamlining the entire filing process and minimizing the risk of errors. One of the platform’s key advantages is its automation of complex calculations. Instead of manually determining taxable income, exemptions, and deductions, TaxBuddy automatically computes these based on the details provided, ensuring accuracy and saving time. This is especially beneficial for taxpayers who are unsure which deductions they are eligible for or how switching between the old and new regimes may impact their overall tax liability.
In addition to automation, TaxBuddy provides personalized recommendations tailored to each individual’s financial situation. It identifies deductions and exemptions applicable under both regimes, enabling taxpayers to make informed decisions that optimize their tax liability. The platform also facilitates a side-by-side comparison of the old and new tax regimes, highlighting which option is more beneficial. Beyond calculations, TaxBuddy ensures compliance with the Income Tax Act, minimizing errors that could delay refunds or trigger notices. With this level of support, taxpayers can confidently file returns, secure all eligible benefits, and ensure timely processing of refunds, creating a seamless and efficient tax-filing experience.
Conclusion
Understanding the New Tax Regime and strategically using allowable deductions and exemptions is key to minimizing tax liability. By comparing regimes, optimizing employer benefits, and investing wisely, taxpayers can maximize savings without compromising compliance. For anyone looking for assistance in tax filing, it is highly recommended to download the TaxBuddy mobile app for a simplified, secure, and hassle-free experience.
FAQs
Q1. Does TaxBuddy offer both self-filing and expert-assisted plans for ITR filing, or only expert-assisted options?
TaxBuddy provides both self-filing and expert-assisted plans. Individuals comfortable managing their ITR independently can use the self-filing plan with guidance, auto-matching tools, and built-in calculators. Those seeking professional support can opt for expert-assisted plans, which ensure accurate filing, maximized deductions, and compliance with all regulations. This flexibility caters to a wide range of taxpayers.
Q2. Which is the best site to file ITR?
TaxBuddy is among the most reliable platforms for filing ITR. Its intuitive interface, AI-driven automation, and real-time TDS verification make filing accurate and hassle-free. Whether self-filing or opting for expert assistance, TaxBuddy simplifies the process while ensuring full compliance with the latest Income Tax rules.
Q3. Where to file an income tax return?
Income tax returns can be filed online through the Income Tax Department’s e-filing portal or via trusted platforms like TaxBuddy, which provide step-by-step guidance, automated data entry, and options for self-filing or expert-assisted filing.
Q4. Can TaxBuddy help compare old vs new tax regimes?
Yes, TaxBuddy allows taxpayers to compare the old and new tax regimes easily. It automatically calculates tax liabilities under both regimes, helping users choose the option that maximizes tax savings.
Q5. Are NPS contributions allowed under the new regime?
TaxBuddy can guide you on NPS (National Pension System) contributions. While some exemptions under the old regime may not be fully available in the new regime, TaxBuddy highlights allowable deductions and provides clarity on eligible contributions for optimal tax planning.
Q6. Can I claim Section 80JJAA deductions through TaxBuddy?
Yes. For eligible businesses hiring new employees, TaxBuddy helps in claiming deductions under Section 80JJAA. The platform ensures all conditions are met, accurately calculates eligible deductions, and includes them in your ITR.
Q7. Does TaxBuddy assist with salary structure optimization for tax saving?
Absolutely. TaxBuddy can analyze your salary components to suggest ways to optimize exemptions, deductions, and benefits. This ensures minimal tax liability while staying compliant with regulations.
Q8. Are home loan interest deductions available under the new regime?
TaxBuddy provides guidance on deductions like home loan interest. While some deductions may differ under the new regime, the platform identifies allowable exemptions to help reduce taxable income.
Q9. Can I track my refund status via TaxBuddy?
Yes. TaxBuddy allows you to track your refund status directly through its platform. It automatically updates the progress once the Income Tax Department processes your ITR, ensuring transparency and timely notifications.
Q10. Is TaxBuddy suitable for salaried individuals and businesses?
TaxBuddy caters to both salaried individuals and business owners. Its AI-driven tools handle diverse scenarios, from salary income and investments to business income, audit compliance, and transfer pricing, making it versatile for all taxpayers.
Q11. Does TaxBuddy provide guidance on permissible employer benefits under the new regime?
Yes. TaxBuddy details which employer-provided benefits, allowances, and reimbursements are tax-exempt under the new regime, helping employees optimize tax savings without violating Income Tax rules.
Q12. How can I ensure maximum tax savings using the TaxBuddy platform?
Maximizing tax savings on TaxBuddy involves uploading all income and investment documents, using the comparison tool for old vs new regimes, claiming eligible deductions, and following expert recommendations. Automated checks reduce errors, while expert-assisted plans provide personalized guidance for optimal results.
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