Many deductions from the old tax system have been removed in the new tax system. But this does not mean that you cannot save tax now. Salaried employees who choose the new tax system in the financial year 2025–26 still have some smart ways to save. Here are 5 simple ways you can reduce your tax.

Smart Ways to Save Tax Under the New Tax Regime

Many people think tax saving is not possible under the new tax system, but that’s not true. Salaried employees still have some easy ways to reduce their tax.

Plan Your CTC Wisely

The new tax regime gives exemptions on some expenses. These include books and magazines, learning and skill courses, mobile or broadband for office use, company car lease, and meal vouchers. To get tax benefit on these, you must submit the correct bills to your employer. If your company policy already covers these, it’s a simple way to save tax.

Use NPS to Save Tax

The employer’s contribution to NPS (National Pension System) is tax-free under section 80CCD(2). Employers can deposit up to 14% of your basic salary into NPS. At retirement, you can take out 60% of the amount without tax, and the remaining 40% must be used to buy an annuity.

More Options to Save Tax

EPF and VPF: Your employer’s EPF contribution is tax-free. You can also add more money through the Voluntary Provident Fund (VPF). But the total employer contribution in NPS and EPF should not go over ₹7.5 lakh per year. Also, your personal EPF contribution should stay under ₹2.5 lakh to get full tax benefits.

Arbitrage Fund and Capital Gain: Arbitrage funds can be a better choice than fixed deposits. FD interest is taxed as per your income slab, but long-term gains in arbitrage funds are taxed at only 12.5% after one year. You can save tax by booking gains of up to ₹1.25 lakh per year and reinvesting them.

Rented Property Benefit: In the new tax regime, HRA and home loan interest deductions are not allowed. But if you rent out a property, you can still claim a tax deduction on the interest paid for the home loan. This is only allowed up to the amount of income earned from rent.