A salaried employee saves tax through one of two regimes. The new regime (default) gives a Rs 75,000 standard deduction and, with the enhanced Section 87A rebate, zero tax on salary income up to about Rs 12.75 lakh — but almost no other deductions. The old regime keeps 80C (Rs 1.5L), 80CCD(1B) NPS (Rs 50k), 80D health insurance, HRA and home-loan interest u/s 24(b) (Rs 2L). Compare both each year: if your total old-regime deductions are large, the old regime often wins; if they are modest, the new regime usually does.
From FY 2023-24 the new tax regime is the default. For FY 2025-26 (AY 2026-27), after Budget 2025, the slabs use Rs 4 lakh bands and the Section 87A rebate makes taxable income up to Rs 12 lakh tax-free; with the Rs 75,000 standard deduction a salaried person pays nil tax up to roughly Rs 12.75 lakh of salary. You must actively opt for the old regime to claim 80C, HRA and the other deductions below.
New Regime — What Salaried Employees Can Still Claim
The new tax regime strips out most deductions in exchange for lower slab rates. A salaried employee can still use these:
| Benefit | New regime? | Amount / rule |
|---|---|---|
| Standard deduction (salary) | Yes | Rs 75,000 — automatic, no investment |
| 87A rebate (resident) | Yes | Tax nil up to Rs 12L taxable income |
| Employer NPS — 80CCD(2) | Yes | Up to 14% of basic+DA; best new-regime saver |
| 80C / 80D / 80CCD(1B) | No | Not available in the new regime |
| HRA / home-loan interest (self-occupied) | No | Old regime only |
Slab rates: nil to Rs 4L; 5% Rs 4–8L; 10% Rs 8–12L; 15% Rs 12–16L; 20% Rs 16–20L; 25% Rs 20–24L; 30% above Rs 24L (FY 2025-26).
Section 80CCD(2) — your employer's NPS contribution — is deductible in both regimes, up to 14% of basic+DA for the new regime, with no rupee cap. It is the single most valuable tax saver still available under the new regime. Ask HR to route part of your CTC through employer NPS.
Old Regime — The Full Salaried Deduction List
If you opt for the old regime, these are the deductions and exemptions a salaried employee typically stacks. Every one of the sections below (except the noted exemptions) needs the old regime.
| Section | What it covers | Limit |
|---|---|---|
| 80C | PPF, ELSS, EPF, LIC, home-loan principal, tuition | Rs 1.5L |
| 80CCD(1B) | Extra NPS (own contribution), over and above 80C | Rs 50k |
| 80D | Health-insurance premium (self / family / parents) | Rs 25k–75k |
| HRA (u/s 10(13A)) | House Rent Allowance if you pay rent | Least of 3 |
| 24(b) | Home-loan interest — self-occupied house | Rs 2L |
| 80E | Education-loan interest (8 years, no cap) | Full |
| 80TTA / 80TTB | Savings / senior-citizen interest | Rs 10k / 50k |
| Standard deduction | Salary (old regime) | Rs 50k |
The Rs 75,000 standard deduction applies only in the new regime; the old regime standard deduction stays at Rs 50,000.
On a home loan the principal repayment counts under 80C (within Rs 1.5L) and the interest is claimed separately under Section 24(b) — up to Rs 2,00,000 for a self-occupied house (full interest for a let-out property, subject to the Rs 2L house-property loss set-off cap). Both apply only under the old regime. Stamp duty and registration also qualify under 80C in the year of purchase.
Renting and paying a home loan? Get every deduction mapped to the right section.
Get ITR Filing Help →Which Regime Saves a Salaried Employee More?
There is no universal answer — it turns on how much you can deduct. The more old-regime deductions you genuinely have (80C, NPS, 80D, HRA, home-loan interest), the more likely the old regime wins. With few deductions, the new regime's lower rates and Rs 75,000 standard deduction usually beat it. Always run both with your actual numbers on the old vs new regime calculator.
New regime (default) wins when
- Your deductions are modest (only 80C or nothing)
- You rent nothing / have no home loan
- Salary up to ~Rs 12.75L — likely nil tax
- You want zero paperwork and no lock-ins
Old regime wins when
- You stack 80C + 80CCD(1B) + 80D fully
- You claim HRA on real rent paid
- You pay Rs 2L home-loan interest u/s 24(b)
- Total deductions are high relative to income
As a rough guide, once your combined old-regime deductions climb into several lakh, the old regime tends to pull ahead at higher salaries. Because the exact crossover shifts with the Budget-2025 slabs and the Rs 12L rebate, treat any thumb-rule as a prompt to actually compute both — do not lock in investments first and check later.
New regime — salary Rs 12L
Old regime — needs deductions
The numbers above are simplified to show the mechanism, not a filing computation. Actual tax depends on your CTC break-up, HRA, exemptions u/s 10 and surcharge (10% above Rs 50L, 15% above Rs 1cr; the new regime caps surcharge at 25%). Use the income-tax calculator or ask a CA before you choose.
Not sure which regime is cheaper for your salary?
Compare with an expert →How to Actually Save Tax on Your Salary
- Old vs new comparison done for your salary
- Regime declared to employer at start of FY
- Form 12BB submitted with proposed investments
- 80C proofs — PPF, ELSS, LIC, EPF, tuition
- NPS statement for 80CCD(1B) and 80CCD(2)
- Health-insurance receipts for 80D
- Rent receipts + landlord PAN (HRA, if rent > Rs 1L/yr)
- Home-loan interest certificate (24b) + principal (80C)
- Standard deduction applied (Rs 75k new / Rs 50k old)
- ITR filed before the due date to keep regime choice
Choose and declare your regime to HR at the beginning of the financial year so TDS on salary is deducted correctly. You can still switch when filing the return (if you have no business income), but if TDS was cut under one regime and you switch to the other, you may have to pay self-assessment tax or wait for a refund.
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Get ITR Filing Help →Tax Saving for Salaried — Frequently Asked Questions
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