FY 2026-27 tax hack: How salaried employees can save tax without HRA under the new regime

Jain also highlighted key considerations for employees regarding House Rent Allowance (HRA) and rented accommodations.

Jain stressed that salaried individuals living in rented accommodations will not lose out by opting for the new regime, as the system continues to accommodate deductions effectively.

Jain also advised employees to consider company-provided vehicles for private use and other allowances when planning their taxes. “All salaried employees should shift to the new regime, and it is more beneficial,” he concluded.

New tax regime: Key benefits for salaried employees

The new tax framework simplifies compliance and provides significant relief for salaried individuals, allowing a tax-free income of up to ₹12.9 lakh.

• Salaried employees with taxable income up to ₹12 lakh pay no income tax due to the rebate provisions.

• A flat standard deduction of ₹75,000 reduces taxable income for all salaried individuals. For example, a gross salary of ₹12.75 lakh becomes ₹12 lakh taxable, resulting in zero tax liability.

• Employers can provide up to ₹15,000 per year in tax-free gifts or festival vouchers (up from ₹5,000). This amount is not included in taxable income.

• Employees can convert HRA into rent-free housing from the employer, with the lease deed in the employer’s name, maximising deductions under the new regime.

• Taxable value of employer-provided vehicles is structured, helping employees plan perquisites effectively.

Old tax regime: Key benefits and updates

• House Rent Allowance (HRA) exemption for employees living in rented accommodation. The metro city list eligible for 50% HRA exemption now includes Mumbai, Delhi, Kolkata, Chennai, Bengaluru, Hyderabad, Pune, and Ahmedabad. Other cities qualify for lower exemptions.

• Deductions up to ₹1.5 lakh for EPF, PPF, life insurance premiums, ELSS mutual funds, and tuition fees.

• Tax benefit for premiums paid for self, family, and parents.

• Deduction on interest paid for higher education loans.

• Deduction for donations to specified organisations.

• Education allowance increased from ₹100 to ₹3,000 per month per child (up to two children).

• Hostel expenditure allowance increased from ₹300 to ₹9,000 per month per child.

• Corporate meal cards up to ₹200 per meal are tax-free (previously ₹50).

• Company vehicles for private and professional use: Smaller cars (up to 1.6 litres) at ₹8,000/month, larger cars at ₹10,000/month, with driver services at ₹3,000/month.

Experts like Ved Jain recommend that most salaried employees shift to the new tax regime for simplicity and higher net benefits, while employees with significant investments, exemptions, or allowances may still find the old regime more suitable for them.