Employees can potentially save millions in taxes under the New Tax Regime, even on a salary of 20 lakh rupees. This regime permits tax-free income up to 12 lakh rupees, significantly benefiting those who structure their salaries wisely.
The standard deduction of 75,000 rupees further enhances these savings. For instance, if an employee earns a basic salary of 10 lakh rupees, their taxable income could be reduced to as low as 11.36 lakh rupees after applying the standard deduction.
Additionally, meal benefits have increased from 50 rupees to 200 rupees per meal. This change allows employees to claim an exemption of up to 105,600 rupees annually based on their meal expenses.
Moreover, contributions from employers to the Employees’ Provident Fund (EPF) can provide an extra tax exemption of up to 1.2 lakh rupees. Similarly, contributions to the National Pension System (NPS) allow for another 1.4 lakh rupees in exemptions.
A notable strategy includes leasing a car, which can significantly increase tax deductions. Without this lease consideration, an employee’s taxable income would rise to approximately 15.59 lakh rupees, leading to a tax liability of around 1.18 lakh rupees.
By structuring their salary effectively—factoring in all available deductions—employees can potentially reduce their net salary for tax calculations down to just over 12 lakh rupees.
The total tax liability could even reach zero under optimal circumstances. Observers note that understanding and utilizing the New Tax Regime is crucial for maximizing tax savings.
The new financial year begins on April 1, 2026, marking the full implementation of these rules. As employees prepare for this transition, they must consider how best to structure their salaries for maximum benefit.
