How to Save Tax in the New Tax Regime: What's Still Deductible

If you're trying to work out how to save tax in the new tax regime, the honest starting point is that its lower slab rates come with an obvious trade-off: most of the deductions people are used to planning around simply don't apply. But "most" isn't "all." A small set of exemptions and deductions survive under the new regime, and knowing which ones matters if you've chosen it, since it changes what's actually worth planning for.

What's gone under the new regime

Before covering what's left, it's worth being clear about what isn't available, since this is where confusion usually starts. Section 80C (EPF, PPF, ELSS, life insurance premiums, and similar), Section 80D (health insurance premiums), HRA exemption, and most other Chapter VI-A deductions do not apply under the new regime. If you're comparing regimes, this is the bulk of what the old regime offers that the new regime removes.

For the full comparison of how this trade-off plays out at different income levels, Old vs New Tax Regime: How to Actually Decide Using Your Own Numbers covers that decision directly.

Standard deduction: ₹75,000, still available

Salaried individuals and pensioners get a flat standard deduction under the new regime too, currently ₹75,000 for FY 2025-26, deducted automatically from gross salary or pension before slab rates apply. This is one of the few deductions that survived the shift to the new regime largely intact, and it's part of why the "income up to ₹12.75 lakh is tax-free" claim works out the way it does. (The full calculation is in How to Calculate Your Income Tax: A Worked Example.)

Employer's NPS contribution: Section 80CCD(2)

If your employer contributes to your NPS account on your behalf, that contribution remains deductible under the new regime, and this is arguably the most substantial tax-saving lever still available to salaried employees who've opted for it. From FY 2025-26, the deduction limit under Section 80CCD(2) is unified at 14% of salary (basic pay plus dearness allowance) for all employees, government and private sector alike, when the employee has opted for the new regime (TaxBuddy, 80CCD(2) in New Tax Regime). Before this change, private sector employees were generally capped at 10%, with only government employees getting 14%.

One thing to watch: this deduction applies to employer contributions, not contributions you make yourself. If your employer doesn't currently route part of your salary into NPS this way, this deduction requires setting that up through payroll, it's not something you can claim by investing in NPS independently. Also note that all employer retirement contributions combined, NPS, EPF, and superannuation, are subject to an aggregate cap of ₹7.5 lakh a year; anything employers contribute above that is taxable.

A few other deductions that survive

Section 80CCH, Agniveer Corpus Fund. Contributions made by Agniveers (and the matching government contribution) to the Agniveer Corpus Fund remain deductible under the new regime.

Home loan interest on a let-out property, Section 24(b). If you own a rented-out property, the interest paid on a home loan for that property remains deductible against the rental income, under both regimes. This is different from a self-occupied property, where the home loan interest deduction is not available under the new regime.

Gratuity, leave encashment, and VRS exemptions. These retirement-related exemptions apply regardless of which regime you choose; they're not regime-dependent deductions in the same sense as 80C or 80D.

How to save tax in the new tax regime: what to actually focus on

Since 80C, 80D, and HRA are off the table, the practical answer to how to save tax in the new tax regime narrows down to two levers: getting your employer to route part of your compensation through Section 80CCD(2) NPS contributions, and making sure the standard deduction and any let-out property interest are correctly claimed at filing time. Beyond that, there isn't much room left to reduce taxable income under this regime, its lower slabs are the trade-off for that narrower set of options.

Should you keep making 80C investments anyway?

If you've chosen the new regime, the tax argument for EPF, PPF, ELSS, and similar 80C instruments disappears, since the deduction doesn't apply. That doesn't mean these investments stop making sense; it means the decision to hold them should rest entirely on their merits as investments (safety, expected returns, liquidity, lock-in periods) rather than on a tax deduction that the new regime no longer grants. Someone who values EPF's stability or ELSS's equity exposure might still choose to invest in them under the new regime, just without expecting a tax benefit for doing so.