Income Tax under the Old Tax Regime
Income Tax under the Old Tax Regime Budget 2025 Key Proposal: The government has introduced a full tax rebate for individuals earning up to ₹12 lakh per year under the new tax regime. With the ₹75,000 standard deduction, anyone with an annual income of ₹12.75 lakh (₹1.06 lakh per month) will pay zero tax. Income Tax under the Old Tax Regime This move is expected to encourage nearly 1 crore more taxpayers to opt for the new regime, further increasing its popularity.
However, despite its appeal, the old tax regime still holds relevance for those who can optimize their salary structure with tax-efficient perks. Income Tax under the Old Tax Regime By carefully restructuring their compensation, individuals can lower their tax liability while enjoying a range of benefits.
Here are 8 tax-efficient salary perks under the old tax regime that can help you save up to ₹1.35 lakh in income tax.
- Fuel and Travel Expenses
Employees who travel for official work can claim tax-free reimbursement for fuel, taxi fares, and vehicle maintenance.
- Self-owned or company-provided vehicle: Income Tax under the Old Tax Regime Reimbursements are tax-free for official use.
- Personal and official use: The taxable amount is ₹2,700 for cars with an engine capacity of less than 1.6L and ₹3,300 for larger cars.
- Driver’s Salary
Senior executives can avail of tax savings by hiring a driver.
- The taxable value is only ₹900 per month, but the actual benefit can save a substantial amount in taxes.
- Leave Travel Allowance (LTA)
LTA allows employees to claim tax-free reimbursement of travel expenses for family vacations twice in a block of four years.
- Ensure LTA is included in your CTC at the beginning of the year, as it cannot be claimed later while filing tax returns.
- Moveable Assets (Gadgets and Appliances)
Companies can buy gadgets and appliances for employees, significantly reducing tax liability.
- Taxation: Only 10% of the asset’s value is taxable.
- Computers and laptops: Tax-free, even if used for personal purposes.
- Telecom and Newspaper Reimbursements
Internet, phone, and newspaper bills reimbursed by the employer are tax-free if supported by actual bills.
https://www.incometax.gov.in/iec/foportal/
- This perk gained popularity during the pandemic due to the rise in work-from-home setups.
- Meal Coupons
Meal coupons are tax-free up to ₹50 per meal, translating to approximately ₹2,200 per month.
- Digital wallets have simplified compliance, making this benefit easier to claim without maintaining physical bills.
- Learning and Fitness Expenses
Some employers reimburse costs for gym memberships and professional skill-enhancement courses.
- These expenses are tax-free, provided employees submit proof of actual usage.
- Telecom and Newspaper Subscriptions
Expenses related to telecom services and newspaper subscriptions can also be reimbursed tax-free. Income Tax under the Old Tax Regime Ensure you keep your bills ready to claim these deductions.
Why Employees Miss Out on Tax Benefits
Many companies avoid offering these perks due to the compliance burden and additional paperwork involved. Income Tax under the Old Tax Regime This lack of awareness and initiative results in employees paying higher taxes than necessary. With the new tax regime becoming the default, fewer employers are focusing on educating their employees on tax-saving opportunities.
However, flexible benefit plans (FBPs) can be game-changers for employees and employers alike. They allow employees to customize their salary structures, aligning with personal financial goals while reducing tax liability. Income Tax under the Old Tax Regime Companies benefit from enhanced employee satisfaction and reduced turnover.
In Conclusion: Even though the new tax regime seems more attractive at first glance, a well-structured salary under the old tax regime can still help employees save a significant amount of tax. Ensure you discuss these benefits with your HR or payroll team and optimize your salary structure to make the most of these tax-saving opportunities.
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Here’s a detailed version of the blog with expanded explanations and examples for each perk:
8 Salary Perks That Can Help You Save Up to ₹1.35 Lakh in Income Tax under the Old Tax Regime – Budget 2025 Update
Budget 2025 Highlight: A major announcement was the full tax rebate for individuals earning up to ₹12 lakh annually under the new tax regime. With the ₹75,000 standard deduction, anyone with an annual income of ₹12.75 lakh or ₹1.06 lakh per month will pay zero tax. The new tax regime has become the default option for most taxpayers, and nearly 6.3 crore individuals have already switched to it.
Despite this shift, the old tax regime remains beneficial for individuals who can restructure their salary and utilize tax-efficient perks. By carefully planning your compensation package, you can save up to ₹1.35 lakh in tax while enjoying additional financial benefits. Let’s explore these 8 tax-saving salary components:
- Fuel and Travel Expenses (Tax Savings up to ₹39,600 per year)
If your job involves travel, you can claim tax-free reimbursement for fuel, vehicle maintenance, and travel expenses.
- Official travel using taxis or public transport: The entire reimbursement is tax-free.
- Self-owned or company-provided vehicle:
- If used exclusively for official purposes, the expenses for fuel, maintenance, and insurance are fully reimbursable without any tax liability.
- For personal and official use, a small taxable amount applies:
- ₹2,700 per month for cars with engine capacity less than 1.6L
- ₹3,300 per month for larger cars
Example: Income Tax under the Old Tax Regime If you claim ₹5,000 per month for fuel and maintenance, you save ₹60,000 annually, with only a portion taxed if the car is also used for personal purposes.
- Driver’s Salary (Tax Savings up to ₹10,800 per year)
Senior executives can avail of tax savings by including the driver’s salary as part of their compensation.
- The taxable value of this perk is only ₹900 per month, while the actual benefit can be much higher depending on the driver’s salary.
Example: If your company reimburses ₹15,000 per month for a driver’s salary, only ₹900 per month is taxable, saving you significant tax on the remaining amount.
- Leave Travel Allowance (LTA) (Tax Savings up to ₹36,000 per year)
Leave Travel Allowance (LTA) allows employees to claim tax-free reimbursement of travel expenses for family vacations.
- LTA can be claimed twice in a block of four years for travel within India.
- It covers travel costs for the employee, spouse, children, and dependent parents or siblings.
Key Points:
- Ensure LTA is included in your CTC at the beginning of the year—it cannot be added later.
- Only travel fare (train, air, or bus) is eligible for reimbursement, not accommodation or food expenses.
Example: If you travel with your family and spend ₹50,000 on airfare, you can claim this amount as tax-free under LTA, reducing your taxable income.
- Moveable Assets (Gadgets and Appliances) (Tax Savings up to ₹30,000 per year)
Your company can buy gadgets (like laptops, tablets, or phones) and appliances (like air conditioners and refrigerators) for your use. Income Tax under the Old Tax Regime These assets are taxed at only 10% of their value if used personally.
- Computers and laptops: No tax applies, even if used for personal purposes.
Example: If your company buys a laptop worth ₹50,000 for your use, there is no tax liability at all. For other appliances, the taxable amount would be only ₹5,000 (10% of the value).
- Telecom and Newspaper Reimbursements (Tax Savings up to ₹24,000 per year)
With the rise of remote work, telecom expenses have increased significantly. Fortunately, companies can reimburse these expenses tax-free if you submit actual bills.
- Internet and phone bills: 100% tax-free if backed by bills
- Newspaper and periodicals: Fully tax-free reimbursement
Example: If your monthly internet and phone bills amount to ₹2,000, you can save up to ₹24,000 annually by claiming these as tax-free reimbursements.
- Meal Coupons (Tax Savings up to ₹26,400 per year)
Meal coupons are tax-free up to ₹50 per meal, which translates to approximately ₹2,200 per month.
- Digital meal wallets have made it easier for employees to avail of this perk without keeping physical bills.
Example: If you work 22 days a month and receive meal coupons worth ₹100 per day (₹50 tax-free), your annual tax-free amount is ₹26,400.
- Learning and Fitness Expenses (Tax Savings up to ₹30,000 per year)
Some companies reimburse expenses for gym memberships and professional courses.
- Gym and fitness programs: Tax-free if the employer pays for them
- Skill-enhancement courses: Both online and offline courses are tax-free if related to your job role
Example: If your company reimburses ₹30,000 for a professional course, you don’t have to pay any tax on that amount, reducing your overall taxable income.
- Health Checkups and Insurance Premiums (Tax Savings up to ₹25,000 per year)
Many employers offer health checkup reimbursements and pay health insurance premiums for their employees. These are tax-free if they fall within the allowed limits.
- Preventive health checkup reimbursement: Up to ₹5,000 tax-free
- Health insurance premium paid by the employer: Fully tax-free
Example: If your employer reimburses your health checkups for ₹5,000 and pays your family’s health insurance premium worth ₹20,000, the entire amount is tax-free.
Why Do Employees Miss Out on These Benefits?
Despite these tax-saving opportunities, many employees end up paying higher taxes due to lack of awareness or limited options provided by their employers .Income Tax under the Old Tax Regime Employers often avoid offering these perks due to the paperwork involved and the compliance burden.
However, flexible benefit plans (FBPs) allow employees to customize their compensation based on their personal expenses and financial goals. These plans not only help reduce tax but also increase employee satisfaction and loyalty.
Conclusion
While the new tax regime may look attractive, the old tax regime can still be more beneficial for those who can optimize their salary structure. Income Tax under the Old Tax Regime By incorporating these 8 tax-saving perks into your compensation, you can reduce your tax outgo by up to ₹1.35 lakh annually.
Take Action: Discuss these benefits with your HR or payroll team and customize your salary package to make the most of these tax-saving opportunities!
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