ITR Filing 2025: Many deductions of the old tax system have been abolished in the new tax system. But, this does not mean that the ways to save tax are closed. Salaried employees who choose the new system in the financial year 2025-26 still have some smart options. Know in which 5 ways you can reduce your tax liability.
Design your CTC smartly
The new tax system provides exemptions on certain expenses. These include things like books and magazines, learning and skill courses, mobile-broadband for office, company car lease and meal vouchers. To avail the benefit of reimbursement of these expenses, it is important to give correct bills to the employees. If these expenses are already covered in your employer’s policy, then this is a direct way for you to save tax.
Take advantage of NPS
The contribution made by the employer to NPS (National Pension System) is tax-free under section 80CCD (2) in the new tax system. As per the rule, the employer can deposit up to 14% of the basic salary in the NPS account. At the age of 60, 60% of the NPS amount can be withdrawn tax-free and the remaining 40% has to be used to buy annuity.
Additional contribution to EPF and VPF
The employer’s contribution to the Employees’ Provident Fund (EPF) is tax free. If the employee wishes, he can also increase his contribution through Voluntary Provident Fund (VPF).
Keep in mind that the total contribution of the employer in NPS and EPF should not exceed Rs 7.5 lakh annually. Whereas the limit for the employee’s own EPF contribution is Rs 2.5 lakh. If it is more than this, the benefit of tax exemption will not be available.
Arbitrage Funds and Capital Gain Harvesting
Instead of fixed deposits (FDs), investing in arbitrage funds can be considered. These funds give returns like FDs, but the taxation method is different. Interest on FDs is taxable as per your income slab, while long term gains in arbitrage funds after one year are taxed at 12.5%.
Salaried employees can optimise tax by booking long term gains of up to Rs 1.25 lakh per annum and reinvesting the same.
Tax savings from rented property
In the new tax system, the exemption on House Rent Allowance (HRA) and home loan interest has been removed. But if you have given a property on rent, then you can still get the benefit of tax exemption on it.
If the property is let-out (on rent), then the interest on the home loan taken on it can be deducted. However, this deduction is available only to the extent of the annual income from rent.
