How to reduce tax in the new tax regime

Shreya, a 42-year-old IT professional, earns Rs 1.4 lakh monthly and has chosen the new tax regime. Recently, during one of our off-the-cuff interactions, she trotted out the widespread perception that the new tax regime offers no tax deductions. But that's just half-baked information. In fact, she still has options to lower her tax outgo. So, if you, like Shreya, are salivating at the mention of lower taxes, this is what you can do too. Option 1: Employees' Provident Fund (EPF) Your employer matches the amount you contribute each month to the EPF. This amount can be used for a tax deduction. Let's take Shreya's example to show you how: Her monthly EPF contribution is Rs 8,400. Because employers are required to match her personal contribution, Shreya's company pays a similar amount of Rs 8,400 each month to the EPF. The employer's contribution is eligible for tax deduction. It means Shreya can claim a tax deduction of Rs 1,00,800 (Rs 8,400 x 12 months) at the end of the year. Option 2: Flexi benefit plan (FBP) Many companies offer FBP as a part of your CTC. Without getting into too much detail, some of the common types of FBP are: Fuel expenses Telephone and internet bills Food expenses (Sodexo meal card is pretty popular) Leave travel allowance Books and periodicals Let's get back to Shreya's example. She receives fuel reimbursement and car maintenance charges worth Rs 10,000 each month, Rs 2,200 monthly for food expenses, and a further Rs 500 for phone bills each month. If she provides bills and invoices for each of these allowances, she can substantially reduce her ta

This article was originally published on November 27, 2023.