When the new tax regime was introduced, many salaried employees quickly came to one conclusion: tax-saving opportunities were over. After all, the regime removed several popular deductions that taxpayers had relied on for years.
But is the new regime really as restrictive as many people think?
Not quite. While the list of deductions is certainly shorter, there are still several benefits available that can help reduce the tax burden. For someone earning around Rs 20 lakh a year, these benefits can add up to meaningful savings and lower the overall tax outgo.
One of the biggest misunderstandings about the is that it leaves no room for tax planning. Tax experts say that is far from the truth.
Gaurav Makhijani, Tax Head at Makhijani Gera & Associates, said many salaried employees overlook the
According to him, meal benefits, company car and fuel facilities, driver allowance, health and wellness benefits, employer contributions to the National Pension System (NPS), and the standard deduction can all help improve tax efficiency.
“The new tax regime still carries many benefits. When combined with the lower slab rates under the new regime, the overall tax burden can be considerably reduced,” he said.
One benefit that remains available to all salaried taxpayers under the new regime is the standard deduction of Rs 75,000.
Unlike investment-linked deductions, this benefit does not require any additional paperwork or financial commitment. It directly reduces taxable income and is available automatically to eligible salaried individuals.
For taxpayers earning Rs 20 lakh annually, this deduction provides an immediate reduction in taxable income before tax calculations begin.
Many employees pay little attention to meal cards or meal allowances while reviewing their salary structure. However, these benefits can make a noticeable difference.
Makhijani said meal benefits of up to Rs 200 per meal can provide a significant annual tax-efficient benefit.
He explained that meal benefits alone can generate a tax-efficient benefit of roughly Rs 1.05 lakh annually, assuming two meals a day, 22 working days a month, across 12 months.
While the amount may seem small on a daily basis, over a year it can meaningfully reduce taxable income.
Among the benefits available under the new regime, employer contributions to NPS continue to stand out.
Makhijani said employer contributions of up to 14% are not taxed in the hands of employees and effectively reduce taxable income.
“Employer contributions to NPS is one of the most significant tax benefits available under the new regime,” he said.
For salaried professionals looking to build retirement savings while reducing taxes, this remains one of the most attractive options available.
Another often-overlooked benefit is the company-provided car facility.
According to Makhijani, company car and fuel benefits enjoy concessional perquisite valuation, which can lower the taxable value of personal transportation expenses compared with receiving a cash allowance.
As a result, employees using employer-provided vehicles may end up paying less tax than those receiving equivalent cash compensation.
Even though the new regime offers lower tax rates and selected benefits, it may not be suitable for everyone.
Employees who claim substantial exemptions and deductions under the old system could still find it more beneficial. These may include House Rent Allowance (HRA), home loan interest, Section 80C investments, employee NPS contributions, medical insurance deductions and charitable donations.
“The answer depends on the deductions available to the taxpayer. A comparative calculation should therefore be undertaken before exercising the option,” Makhijani said.
The tax impact of these benefits can be significant.
Makhijani noted that an employee earning Rs 20 lakh annually who avails only the standard deduction and eligible meal benefits could face a tax liability of around Rs 1.7 lakh.
“In fact, for an employee earning Rs 20 lakh, availing only the standard deduction of Rs 75,000 and meal benefits of approximately Rs 1,05,600 can result in a tax liability of around Rs 1,70,435, translating to an effective tax rate of about 8.5%,” he said.
Simply put, if you earn Rs 20 lakh a year and have dismissed the new tax regime as a “no-benefit” option, it may be worth taking another look.
The regime may have removed many traditional deductions, but opportunities to save tax still exist through smart salary structuring, employer-sponsored benefits and retirement contributions. The key is understanding which benefits remain available — and making sure you’re not leaving money on the table.