ITR Filing 2025: 3 Smart Deductions to Save Money Under the New Income Tax Regime!

ITR Filing 2025: Income Tax Return (ITR) filing season is here, and taxpayers in India are looking for ways to maximize their savings under the new income tax regime. While the old regime allows multiple deductions and exemptions, the new regime simplifies tax slabs but limits most traditional deductions. However, there are still some strategic ways to reduce taxable income and save money under the new structure.

If you’re wondering how to legally lower your tax liability, this guide will break down the three smart deductions you can claim under the new tax regime. These deductions will ensure you don’t overpay taxes while complying with regulations.

ITR Filing 2025

The new income tax regime aims to simplify taxation, but many taxpayers worry about losing deductions. Fortunately, the standard deduction, NPS employer contribution, and home loan interest deduction remain available, providing tax-saving opportunities.

Before filing your ITR, compare both tax regimes to determine which one benefits you the most. If you’re unsure, consult a tax expert or use the Income Tax Calculator to make an informed decision.

Understanding the New Income Tax Regime

The new tax regime, introduced in the Union Budget 2020 and revised in 2023, offers lower tax slabs but removes most traditional deductions. Taxpayers can now choose between:

1. Old tax regime (with exemptions like HRA, 80C, 80D, etc.)
2. New tax regime (simpler tax slabs but limited deductions)

For FY 2024-25, the new tax regime is the default option, but taxpayers can opt for the old regime if they find it more beneficial.

Here’s the tax slab under the new regime:

While this structure reduces overall tax rates, taxpayers still want ways to save more money legally. Here’s how you can do it.

1. Standard Deduction for Salaried Individuals and Pensioners

A major relief in the new tax regime is the availability of a standard deduction of ₹50,000 for salaried employees and pensioners. This deduction is automatically applied and helps reduce taxable income without any additional paperwork.

Example:

• If your salary is ₹10 lakh, you can claim a ₹50,000 deduction, reducing your taxable income to ₹9.5 lakh.
• This helps you save ₹5,000 in taxes (10% of ₹50,000) under the new regime.

Who can claim it?

• Salaried individuals (employees receiving a fixed salary)
• Pensioners (retired individuals receiving a monthly pension)

This deduction ensures some level of tax savings without requiring investment in tax-saving instruments.

2. Employer’s Contribution to NPS (Section 80CCD(2))

Under Section 80CCD(2), taxpayers can claim a deduction on their employer’s contribution to the National Pension System (NPS).

Deduction Limit:

• Private employees: Up to 10% of their basic salary + DA
• Government employees: Up to 14% of their basic salary + DA

Example:

If your basic salary is ₹8 lakh and your employer contributes 10% (₹80,000) to NPS, this amount is deducted from taxable income under the new tax regime.

Benefits:

• Helps reduce taxable salary income
• Encourages retirement savings

Unlike 80C deductions (which are unavailable under the new regime), this benefit is still available, making it a great tax-saving option.

3. Interest on Home Loan for Let-Out Property

If you have a home loan for a rented-out property, you can still claim a deduction on the interest paid under the new tax regime.

How does it work?

• The entire interest amount paid on a home loan for a let-out (rented) property can be deducted from rental income.
• There’s no cap on this deduction.

Example:

• If you pay ₹2 lakh as home loan interest and earn ₹3 lakh in rent, you can deduct ₹2 lakh from rental income, reducing taxable rental income to ₹1 lakh.
• This lowers overall tax liability significantly.

This deduction is especially useful for real estate investors or individuals with multiple properties.

Additional Tax-Saving Strategies

• Rebate under Section 87A: If your taxable income is ₹7 lakh or below, you qualify for a full tax rebate, paying zero tax under the new regime.
• Voluntary EPF Contributions: While the new regime doesn’t allow deductions under 80C, voluntary EPF contributions (above the mandatory 12%) can still help build savings.
• Health Insurance Benefits: Though Section 80D isn’t applicable, buying health insurance provides financial security and indirect tax savings.

FAQs On ITR-Filing-2025.jpg

1. Q: What is the standard deduction available under the new tax regime?
   A: The standard deduction of ₹50,000 is available for salaried individuals and pensioners under the new tax regime.
2. Q: Can I claim deductions under Section 80C in the new tax regime?
   A: No, deductions under Section 80C (like PPF, ELSS, and LIC premiums) are not available in the new tax regime.
3. Q: How does the employer’s NPS contribution help in tax saving?
   A: Employers can contribute up to 10% (14% for government employees) of the basic salary to NPS, which is deductible under Section 80CCD(2).
4. Q: Can I claim a home loan interest deduction under the new tax regime?
   A: Yes, you can claim a full deduction on interest paid for a let-out (rented) property from your rental income.
5. Q: Is there any rebate for lower-income taxpayers under the new tax regime?
   A: Yes, under Section 87A, taxpayers with income up to ₹7 lakh get a 100% tax rebate, meaning no tax is payable.
6. Q: Can I switch between the old and new tax regimes every year?
   A: Salaried individuals can switch every financial year, while business owners have limited switching options.