New Tax Regime: You Can Still Save a Substantial Amount of Tax Under the New Regime! These 3 Major Deductions Will Do the Trick..

The number of taxpayers opting for the new tax regime is steadily increasing. The primary reason for this is that annual salary income up to ₹12.75 lakh is completely tax-free. However, many people believe that the new regime offers no tax exemptions or deductions whatsoever. This, however, is not entirely accurate. The new tax regime still provides certain significant deductions that can help reduce taxable income and offer relief on tax liability. Let us explore three such major deductions.

**Direct Relief Through Standard Deduction**
Under the new tax regime, salaried employees and pensioners are eligible for a standard deduction of up to ₹75,000. No specific investments, bills, or supporting documents are required to avail of this exemption; this deduction is simply subtracted directly from the salary income. For instance, if an employee has an annual salary of ₹15 lakh, applying the standard deduction of ₹75,000 would reduce their taxable income to ₹14.25 lakh. In Budget 2024, this deduction was increased from ₹50,000 to ₹75,000 with the aim of boosting savings for employees.

**Employer's Contribution to NPS Offers Additional Benefits**
The new tax regime also provides tax exemptions on contributions made by an employer to a Tier-I account under the National Pension System (NPS). Employees can claim a deduction on employer contributions amounting to up to 14% of the sum of their Basic Salary and Dearness Allowance (DA). This exemption is available *in addition* to the standard deduction, thereby further enhancing tax savings. For example, if an employee's basic salary is ₹10 lakh and their employer contributes ₹1.4 lakh to their NPS account, the employee can avail of tax benefits on the entire ₹1.4 lakh. However, the aggregate limit for employer contributions across NPS, EPF, and Superannuation Funds is capped at ₹7.5 lakh per financial year. Contributions exceeding this limit may be subject to different tax regulations. **Home Loan Interest Exemption for Rented-Out Properties**

Under the new tax regime, the exemption on home loan interest for self-occupied properties is not available; however, this benefit continues to apply in the case of rented-out properties. The interest paid on loans taken to purchase, construct, or repair such properties can be claimed as a tax deduction.

A key feature of this exemption is that there is no prescribed upper limit on the interest deduction for rented-out properties. This means that the actual interest paid can be deducted while computing one's income. However, under the new tax regime, losses arising from house property cannot be set off against other sources of income. Nevertheless, this provision can prove beneficial for individuals who have purchased a house for investment purposes and subsequently rented it out.

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