With every financial year, India’s tax landscape evolves—and FY 2025–26 is no exception. The government continues to simplify and modernize the income tax structure, particularly under the New Tax Regime, which has now become the default for most salaried individuals.

For taxpayers earning regular salaries, understanding the available exemptions, rebates, and benefits is key to optimizing take-home pay. This article outlines all the major income tax benefits applicable for salaried individuals in FY 2025–26 and how they compare to the previous structure.

The New Tax Regime: Now More Attractive

The New Tax Regime, introduced as a simpler alternative in 2020, is now being actively promoted by the government. With a wider tax-free slab, a higher rebate, and fewer deductions to track, it appeals especially to salaried individuals with straightforward incomes.

While taxpayers can still opt for the Old Tax Regime if they want to claim Section 80C, HRA, and home loan interest deductions, most salaried individuals will now benefit more under the New Regime, particularly with the recent changes effective from April 1, 2025.

Revised Income Tax Slabs for FY 2025–26 (Under New Regime)

The zero-tax threshold has effectively been raised from ₹7 lakh to ₹12 lakh due to changes in rebates and deductions (explained below), significantly easing the burden on middle-class earners.

Key Tax Benefits and Exemptions for Salaried Individuals in FY 2025–26

1. Standard Deduction – ₹75,000

• A flat deduction of ₹75,000 from gross salary income is now allowed even under the new regime (earlier ₹50,000).
• This benefits all salaried taxpayers regardless of income level or investments.

1. Standard Deduction – ₹75,000

• The rebate under Section 87A has been enhanced to ₹60,000.
• If your total taxable income (after standard deduction) is up to ₹12,75,000, you will not pay any income tax.
• This is a substantial change from the previous ₹25,000 rebate for incomes up to ₹7 lakh.

3. Employer’s Contribution to NPS – Fully Deductible

• If your employer contributes to your National Pension Scheme (NPS) Tier I account, you get a deduction up to 14% of your basic salary (for government employees) or 10% (for others).
• This deduction continues to be allowed under the new regime and is not subject to the ₹1.5 lakh cap of Section 80C.

4. Tax-Free Gratuity and Leave Encashment

• Gratuity received by employees on retirement or resignation continues to be exempt up to ₹20 lakh (for those covered under the Payment of Gratuity Act).
• Leave encashment is also tax-free up to ₹3 lakh for non-government employees.

5. Interest on EPF/PPF and Employer PF Contributions

• Interest on EPF accounts remains tax-free up to a threshold of ₹2.5 lakh per year.
• Employer’s contribution to Provident Fund is tax-free up to 12% of salary

6. Exemption on Leave Travel Allowance (if Old Regime Chosen)

• If a taxpayer opts for the old regime, they can still claim LTA exemption on domestic travel expenses incurred during approved leave.
• In the new regime, LTA is not available.

7. Exempt Perquisites and Reimbursements (as per employer policy)

Even under the new regime, some reimbursements and perquisites remain tax-exempt:

• Reimbursement of telephone bills or internet expenses
• Uniform allowance, where applicable
• Meal vouchers up to ₹50 per meal
• Car reimbursement for official usage (subject to limits)

Should You Choose the New Regime or the Old?

For salaried individuals without large home loans or 80C investments, the new regime is likely to be more beneficial.

However, those with:

• significant housing loan interest (Section 24)
• children’s tuition and insurance premiums (80C)
• HRA with rent receipts
• 80D health insurance premiums

…may find the old regime more tax-efficient

Example: Comparing Tax Liability in FY 2025–26

Scenario: Gross Salary ₹12,75,000

• Under New Regime:
  • Less Standard Deduction: ₹75,000
  • Taxable Income: ₹12,00,000
  • Rebate under 87A: ₹60,000
  • Effective Tax: Nil
• Under Old Regime:
  • Assuming deductions under 80C, 80D, HRA etc. total ₹2,00,000
  • Taxable Income: ₹10,75,000
  • No rebate (above old limit)
  • Tax payable: ~₹1,22,500 (after cess)

Conclusion: The new regime offers greater savings for most salaried individuals in this bracket.

How AK Consulting Can Help Salaried Individuals Maximize Tax Savings

At AK Consulting, we believe tax planning is not just about filing returns—it’s about aligning your income, benefits, and deductions to take full advantage of what the law offers. Here’s how we help you:

1. Regime Comparison & Selection

We prepare a side-by-side projection of your tax liability under both regimes based on your actual salary components, investments, and deductions—so you choose the one that minimizes your liability.

2. Salary Structuring Advisory

We help you restructure your salary components in coordination with your employer to include more tax-efficient benefits like:

• Meal vouchers
• NPS contributions
• Internet/telephone reimbursements
• Tax-free allowances

3. Tax Projections & Withholding Advice

We guide you on how much tax will be deducted monthly, and what declarations to submit to your employer, so that you don’t overpay or underpay and face notices later.

4. NPS Optimization Strategy

We assist in setting up your NPS Tier I and II investments, and advise on how much to contribute voluntarily to get retirement and tax benefits.

5. Revised Return & Compliance Assistance

If you missed claiming deductions or want to switch regimes after filing, we help file revised returns and handle all compliance communication.

Final Thoughts

FY 2025–26 brings unprecedented clarity and relief to the salaried class—but only for those who understand the changes and make informed choices. With a higher rebate limit, standard deduction, and more progressive slabs, most salaried taxpayers can now legally pay zero or significantly reduced tax without complicated planning.

However, every salary structure and personal financial profile is different. That’s where personalized planning makes the difference between overpaying and optimizing.

At AK Consulting, we specialize in helping working professionals make the most of every exemption and deduction available—legally, strategically, and confidently.

Want to Know Which Regime Saves You More?

Reach out to AK Consulting for a personalized consultation. Whether you’re looking to reduce tax, structure your salary, or plan investments more wisely, we’re here to help you make every rupee work smarter.