How to Save Tax in the New Tax Regime 2024-25 in India?

24 January 2025

The new tax framework simplifies slabs, relaxing tax burdens. But unfortunately, many deductions and exemptions available under the old system are no longer available. So, you should smartly optimize your tax liabilities under the new regime. However, a tax consultant can help in strategic planning for you.

How? Here comes the answer.

1. Choose Standard Deduction
Since the government offers a standard deduction of ₹50,000 for salaried employees and pensioners, ensure that you would claim that deduction. This standard deduction will offload the burden of your taxable income. And this does not require additional documentation.

 2. Opt for tax-efficient instruments like NPS
Though the new tax structure does not support many exemptions. But still, some investment opportunities can be derived, which are given below:

 A. Invest in NPS (National Pension System): Contributions made by your employer to the NPS Tier 1 account can be the best tax-free option. It brings the relaxation up to ₹50,000.

B.  Tax-Free Bonds: A few tax-free bonds are still available that provide tax-free income.

C. Life and Health Insurance: Life and health insurance can be the best alternative if you’re interested in investing for long-term savings and security.

3. Tax Rebate under Section 87A
This alternative is related to your taxable income, which must not exceed ₹7 lakh. If this is so, you can easily save a rebate under Section 87A while effectively reducing your tax liability to zero.

4. Interest on Loan on Rented Property
Interest paid on a home loan for rented property is deductible and hence can be claimed under the tax framework. It can significantly offload your tax liability.

5. Meticulously Avoid Certain Deductions
It's true that tax rates are lower. But the new tax framework does not allow common deductions, as under Section 80C (investments in LIC, PPF, etc.), Section 80D (medical insurance premiums), etc. So, simply measure and find whether the lower tax rates compensate for the loss of these deductions.

 6. Reap Benefits of Lower Slabs
The new tax framework is likely to be incredible for those who avoid or do not claim multiple deductions. You should evaluate your income and expenses at first. It will help in deciding whether the lower tax slabs outweigh the leverages of the old tax system’s deductions.

7. Contribute to EPF and VPF
Another approach is associated with the Employee Provident Fund (EPF) and Voluntary Provident Fund (VPF). These accounts are known for the contributions from an employer and an employee. These accounts can be free from taxes to a certain limit. You may drive tax savings through this alternative.

8. Claim Employer Benefits
Certain employers offer allowances, such as meal coupons, travel reimbursements, or health check-up benefits. The new tax framework keeps these allowances tax-free. You may check it with your HR manager or team to leverage.

9. Go for HRA (House Rent Allowance)
House Rent Allowance, or HRA, is exempt from tax deduction under specific conditions. So, you may evaluate whether you are eligible for this alternative. If yes, get the necessary documentation done according to your eligibility.

10. Take Help of Professional Income Tax Consultants

The new tax-saving framework might be complex. Navigating it can be full of hassles. So, you should contract with a professional income tax consultant. This act will introduce you to some really effective, tailored advice. Moreover, you can easily come across hassles in optimizing your tax liability. The professional consultant will guide you on how to attract legitimate opportunities to maximize tax savings.

Conclusion
The 2024-25 tax framework brings new opportunities to manage and save taxes effectively. You need to understand which options are likely to work well for you. Then, take proactive steps accordingly. This is how you can save on taxes while being compliant with the regulations. In case of any complication, you may consult with professional tax consultants and seek personalized guidance. These practices will provide a stress-free tax filing experience.