New Tax Regime Still Has Multiple Tax-Saving Options: A Complete Guide for Salaried Employees

Opting for the new tax regime does not mean losing all tax benefits. From a ₹75,000 standard deduction to employer NPS contributions under Section 80CCD(2) and several daily reimbursements, salaried taxpayers still have meaningful ways to reduce their tax outgo.

A common misconception among salaried employees who switch to the new tax regime is that they have virtually no tax-saving avenues left. That is not the full picture. While the new regime eliminates the popular deductions of the old system, such as those under Section 80C, it still provides a practical range of benefits including a sizeable standard deduction, tax-free employer contributions, daily allowances and reimbursements that can together amount to significant savings.

The ₹75,000 Standard Deduction Needs No Documentation
Salaried employees and pensioners who opt for the new tax regime automatically receive a standard deduction of ₹75,000 from their taxable income. What sets this benefit apart is that it requires absolutely no paperwork. No bills, no receipts and no proof of expenditure need to be submitted. The deduction is applied directly without any effort from the employee's side.

Section 80CCD(2): Employer NPS Contributions Are the Strongest Tax-Saving Tool
Of all the deductions still available under the new regime, the one provided under Section 80CCD(2) of the Income Tax Act is arguably the most powerful. When an employer contributes to an employee's National Pension System (NPS) account, that entire contribution is exempt from tax, up to 14 percent of the employee's basic salary and Dearness Allowance (DA) combined. To illustrate, if an employee's basic salary and DA together add up to ₹12 lakh in a year, the employer can put in up to ₹1.68 lakh into that employee's NPS account completely free of tax. A key point is that this benefit is available over and above the ₹75,000 standard deduction, not as a substitute for it.

EPF and Superannuation Fund: Keep an Eye on the ₹7.5 Lakh Ceiling
Employer contributions to an employee's EPF account also carry a tax benefit, but only up to a defined limit. Taxpayers need to watch their aggregate carefully: if the combined annual employer contributions to EPF, NPS and the superannuation fund together exceed ₹7.5 lakh in a financial year, the amount above that ceiling becomes taxable in the employee's hands.

Rented Property with an Active Home Loan? The Deduction Still Works
Taxpayers under the new regime who own a property that is let out on rent and are also servicing a home loan on it can still claim a deduction on the interest paid on that loan. This provision is particularly useful for those who earn rental income from a mortgaged property, as it allows them to offset part of their interest cost against taxable income.

Meal Coupons and Daily Benefits Carry a Daily Exemption
Several routine employer-provided benefits remain outside the tax net even under the new regime. For the tax year 2026-2027, free meals, non-alcoholic beverages and food coupons that can be redeemed at restaurants or cafes, all provided by an employer, attract a daily tax exemption of up to approximately ₹200.

Mobile, Internet and Broadband Reimbursements Are Fully Tax-Free
When an employer reimburses an employee for mobile phone, internet and broadband expenses that are incurred for official use, the reimbursed amount is entirely exempt from tax under the new regime. Employees must submit original bills to their company to avail this benefit. Beyond reimbursements, company-provided mobile phones and laptops supplied for work purposes, as well as the insurance on such devices, are also treated as tax-free perquisites.

Select Official Duty Allowances Retain Their Exemption
While the new tax regime has brought most allowances under the taxable bracket, a specific set of allowances tied to official duties continue to enjoy exempt status. These include business travel allowances, expenses reimbursed during a job transfer, daily incidental expenses incurred while on duty, a transport allowance for differently-abled employees, and a uniform maintenance allowance.

Family Pension Recipients Are Also Covered
The new tax regime extends its benefits beyond those in active employment. Family members who receive a family pension in place of a deceased employee are also entitled to a deduction. They can claim whichever is lower between one-third of the total pension received and a maximum ceiling of ₹25,000, reducing their taxable income accordingly.

What this means for you
• For salaried employees: Those who have opted for the new tax regime can still substantially cut their tax bill through the ₹75,000 standard deduction, employer NPS contributions under Section 80CCD(2) and various reimbursements for official expenses.
• For family pension recipients: Family members drawing a family pension can claim a deduction of one-third of the amount received or up to ₹25,000, directly lowering the amount of income that gets taxed.

Questions & Answers

1. How much standard deduction is available under the new tax regime?
Salaried employees and pensioners who opt for the new tax regime receive a standard deduction of ₹75,000, with no documentation required to claim it.

2. What is the tax exemption limit on employer NPS contributions under Section 80CCD(2)?
An employer can contribute up to 14 percent of an employee's basic salary plus DA to the NPS account tax-free, and this benefit is available over and above the ₹75,000 standard deduction.

3. What is the combined tax-free limit for employer contributions to EPF, NPS and the superannuation fund?
The total annual employer contribution across all three funds must not exceed ₹7.5 lakh to remain tax-free; any amount above this threshold is taxable in the employee's hands.

4. Can you claim a home loan interest deduction on a rented property under the new tax regime?
Yes, if you own a property that is let out on rent and carries an active home loan, you can still claim a deduction on the interest paid under the new tax regime.

5. What is the daily tax exemption on meal coupons and employer-provided food?
For the tax year 2026-2027, free meals, non-alcoholic beverages and food coupons provided by an employer attract a daily tax exemption of up to approximately ₹200.

6. When is a mobile and internet bill reimbursement fully tax-free?
Reimbursements for mobile, internet and broadband expenses used for official work are completely tax-free, provided the employee submits original bills to the company.

7. What deduction is available on family pension under the new tax regime?
Family members receiving a family pension can claim a deduction equal to one-third of the pension received or a maximum of ₹25,000, whichever is lower.

8. Which official duty allowances are still exempt under the new tax regime?
Business travel allowances, transfer expenses, daily incidental expenses on duty, a transport allowance for differently-abled employees and a uniform maintenance allowance all remain tax-exempt.

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