NRI Income Tax Compliance

Opted for the New Tax Regime? Here are 5 Smart Ways to Lower Your 2026 Tax Bill

Shubham Jain
Written by Shubham Jain
Updated on: July 21, 20263 mins Editorial Standards
New Tax Regime

The new tax regime lets salaried taxpayers earning up to ₹12.75 lakh enjoy a zero-tax status. Because of this, a common myth is that you no longer need to plan for tax savings. However, that is a misconception. There are various smart ways that can help a salaried taxpayer to reduce your tax liability when filing ITR for AY 2026-27. If you want to know what these smart ways are, keep reading.

Key Takeaways
  • The new tax regime does not eliminate tax planning. Even though eligible salaried individuals can enjoy zero tax up to ₹12.75 lakh through the Section 87A rebate, several deductions and exemptions remain available.
  • Under the new regime, salaried taxpayers can claim a standard deduction of ₹75,000 to reduce their taxable income without making any investments.
  • Employer contributions to the National Pension System (NPS) under Section 80CCD(2) can still be deducted, which makes NPS one of the most effective tax-saving options under the new regime.
  • Certain exemptions remain available, including deductions for home loan interest on eligible let-out properties, family pension relief, gratuity, leave encashment, and Voluntary Retirement Scheme (VRS) benefits, subject to applicable conditions.
  • Opt between the old and new tax regimes based on your income and available deductions. Before filing your returns, compare both regimes and determine which one reduces your overall tax liability.

Home Loan Interest on Let-Out Property

Under the new tax regime, home loan interest deduction on self-occupied property is not available. However, taxpayers can still claim a deduction on the Interest paid on let-out property. As compared to the old system, the new tax regime offers fewer deductions, but it does not avoid the tax benefits completely. You still get a few options to reduce your taxable income, such as the standard deduction of ₹75,000, NPS contributions, family pension relief and retirement-related exemptions.

Tax Deduction on Family Pension

Individuals who receive a family pension are also eligible to benefit from tax relief under the new tax regime. Either a deduction of ₹25,000 or one-third of the pension received, whichever is lower, can be claimed.

This helps to lower the taxable income of family pension recipients. Also, even after they shift to the new tax structure, this provision remains available.

Standard Deduction Under the New Regime

A salaried individual who opts for the new tax regime can claim a standard deduction of ₹75,000 while filing the return. Earlier, this deduction was of ₹50,000, which was later increased to ₹75,000 in the Union Budget 2024 to increase disposable income for salaried taxpayers.

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Under the new tax regime, several retirement-related exemptions continue to be available. It includes exemptions on gratuity under Section 10(10), leave encashment under Section 10(10AA), and compensation received under a Voluntary Retirement Scheme (VRS) under Section 10(10C). However, all these are subject to specified conditions and limits.

Employer's Contribution to NPS

For contributions made by an employer to an employee's national pension system account under Section 80CCD(2), a deduction can be claimed under the new tax regime. The deduction can be up to 14% of the employee's salary for the employer's contribution. You can take advantage of this benefit regardless of whether you work in the government or the private sector.

Key Features of the New Tax Regime for FY 2025-26

Here are some of the key features of the new tax regime for individual taxpayers:

  • The basic exemption limit under the new regime is ₹4 lakh.
  • It is the default tax regime. However, you may opt for the old tax regime in any financial year, provided you have no business income.
  • Under Section 87A, the tax rebate offers zero-tax status for taxable incomes up to ₹12.75 lakh for salaried individuals and ₹12 lakh for others.
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To Conclude

Although the new tax regime offers a simplified tax structure with reduced tax rates and a higher rebate threshold, it does not eliminate the need for tax planning. Salaried taxpayers can reduce their taxable income by taking advantage of the available benefits like standard deduction, employer's NPS contribution, eligible retirement-related exemptions, home loan interest on let-out properties, and family pension deduction.

You must compare both regimes based on your income, deductions, and financial goals before filing your ITR for AY 2026-27. If you are not sure which option is beneficial, consult an expert at Savetaxs. Our experts can help you make an informed decision and ensure compliance with the tax laws. Contact us right away, as our team is actively working 24/7 across all time zones.

Glossary
  • Income Tax: Income Tax, a Type of Direct Tax, is Imposed by the Government on the Income of Individuals or Organisations.
  • Income Tax Act: Income Tax Act, an Act to Manage and Govern the Direct Taxes, by Levying, Collecting, and Administering.
  • Income Tax Return: Income Tax Return, Filed by Taxpayers, Contains a Formal Record of the Collected Tax by the Government.
  • National Pension Scheme: National Pension Scheme: Contribute to Get a Regular Income Post-retirement, Provide Many Investment Options.
  • Income Tax Rebate: Understand Section 87A rebate limits under old and new tax regimes and eligibility conditions.
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Note: This guide is for information purposes only. The views expressed in this guide are personal and do not constitute the views of Savetaxs. Savetaxs or the author will not be responsible for any direct or indirect loss incurred by the reader for taking any decision based on the information or the contents. It is advisable to consult either a CA, CS, CPA or a professional tax expert from the Savetaxs team, as they are familiar with the current regulations and help you make accurate decisions and maintain accuracy throughout the whole process.

About Author
Shubham Jain
Shubham Jain Founder & NRI Tax Advisor

Shubham Jain is the Founder of SaveTaxs and has extensive experience in Indian and NRI taxation. He advises individuals, NRIs, and businesses on tax filing, tax planning, capital gains, DTAA benefits, fund repatriation, and compliance matters. He regularly writes about taxation and related financial topics. His focus is on making complex tax concepts easy to understand. Through his articles, he helps taxpayers stay informed, avoid common mistakes, and stay compliant with Indian tax laws. See Full Bio

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Frequently Asked Questions

Yes, although most traditional deductions are removed under the new regime, taxpayers can still reduce their tax legally by claiming some exemptions and allowances. 

The key starting point is to use the standard deduction for salary/pension and ensure a correct salary structure with the employer.

Employer contributions to NPS (up to the prescribed percentage of basic) remain deductible and help reduce the taxable income directly.

Yes, small gifts and meal vouchers within the prescribed limits remain tax-efficient under the new rules.

Individuals who have lower investments in 80C/80D and a higher take-home salary often benefit more. However, this may vary by individual.