Tax Saving Strategies Under the New Tax Regime (FY 2024-25)

As we approach the end of the financial year 2024-25, it is crucial to review tax-saving strategies available under the new tax regime. Unlike the old regime, where multiple deductions and exemptions were available, the new scheme offers limited tax-saving avenues. However, with careful planning, taxpayers can still optimize their tax liability effectively. At Infosential LLP, we have compiled key deductions that remain available under the new tax regime and how taxpayers can leverage them.

1. NPS Contributions - Section 80CCD (2)

For salaried individuals whose employers contribute to the National Pension System (NPS), a valuable deduction is available under Section 80CCD (2). Here’s how it works:

If an employer contributes to an employee’s NPS account, the contribution is deductible from the employee’s taxable income.
The maximum deduction allowed is 14% of the employee’s salary (Basic + DA) for central government employees and 10% for other employees.
This deduction is over and above the Rs. 1.5 lakh limit under Section 80C, making it a valuable tool for tax planning.

2. Deduction on Interest Paid for Home Loan - Section 24(b)

Home loan interest deductions under Section 24(b) are available under the new regime but with restrictions:

The deduction is applicable only if the house property is let-out (rented).
The maximum deduction for interest paid on a home loan remains at Rs. 2 lakh per annum.
For self-occupied properties, this deduction is not available under the new regime.

3. Capital Gains Exemptions - Sections 54, 54F, and 54EC

Capital gains tax can be significantly reduced through investments in specified assets:

Section 54: Allows exemption on capital gains from the sale of a residential property if reinvested in another residential property within the stipulated time.
Section 54F: Provides exemption on long-term capital gains from the sale of any capital asset (other than a house) if the proceeds are invested in a residential property.
Section 54EC: Offers tax exemption on long-term capital gains if invested in specified bonds (such as NHAI and REC) within six months of the sale.
These exemptions continue to be available under the new tax regime, making them crucial for capital gain tax planning.

Additional Tax-Saving Tips for FY 2024-25

While the new regime eliminates many traditional deductions, taxpayers can still adopt the following strategies to optimize tax outflow:

Maximize employer contributions: If possible, request your employer to contribute more towards your NPS account for additional tax benefits.
Optimize investments: If you are planning to sell a capital asset, ensure reinvestment in eligible assets to claim exemptions under Sections 54, 54F, or 54EC.
Plan home purchases strategically: Since interest deduction is available only for rented properties, consider leveraging rental income and tax benefits accordingly.
Use standard deduction: A standard deduction of Rs. 50,000 is available for salaried employees and pensioners under the new regime.

Final Thoughts

While the new tax regime limits traditional deductions, proper financial planning can still help taxpayers minimize their liabilities. At Infosential LLP, we assist individuals and businesses in navigating the complexities of tax planning and optimizing their financial decisions. As we approach the close of FY 2024-25, ensure that your tax-saving strategies are aligned with the current regulations.

For personalized tax planning assistance, get in touch with Infosential LLP today!