The new labour codes are quietly reshaping salary structures in a way that lowers taxable income for most employees. According to reports from Mint, by mandating that basic pay plus eligible allowances account for at least 50% of total CTC, they push up components such as gratuity and employer contributions to the Employees' Provident Fund (EPF). In the new tax regime, where most exemptions that earlier qualified as 'wages' have been removed, this shift naturally results in a higher basic component. As a result, linked contributions such as EPF (12% of basic), gratuity, and National Pension Scheme (up to 14% of basic) rise in tandem. The basic exemption limit is ₹3 lakh under the new regime, with rebate under Section 87A providing tax-free income up to ₹7 lakh for eligible taxpayers. However, recent changes have significantly enhanced the new regime's appeal, with the rebate limit increased to ₹60,000 under Section 87A, compared to only ₹12,500 in the old regime for income up to ₹5 lakh.
The expanded meal allowance can significantly reduce taxable income beyond the ₹12 lakh threshold. As reported by Mint, with the exemption now at ₹200 per meal (up from ₹50), employees can claim up to ₹400 a day for two meals. Over 22 working days a month and 12 months, that translates to ₹1.05 lakh in tax-free value annually. Even a fraction of this benefit is enough to push taxable income below the ₹12 lakh threshold, with fully utilized benefits allowing CTCs of up to about ₹15.05 lakh to be structured into effectively zero-tax income under the new regime. The standard deduction is ₹75,000 for salaried individuals and pensioners, automatically deducted from gross salary income before calculating tax. This deduction has been raised from the previous ₹50,000, reducing the gap between the two regimes.
Salary structuring has become central under the new regime, where the goal is to bring taxable income within the ₹12 lakh rebate threshold. According to Mint reports, one of the most effective levers is employer contribution to the NPS, not just for the immediate tax benefit, but also as a long-term retirement tool. Recent changes, including greater withdrawal flexibility after 15 years and up to 80% tax-free corpus at maturity, have added to its appeal for salaried individuals. A car lease is another powerful component, structured through the employer, allowing expenses such as fuel and driver salary to be claimed as tax-free reimbursements. The maximum surcharge rate is capped at 25% under the new regime, with marginal relief ensuring additional tax does not exceed incremental income. However, the new regime offers limited scope for deductions compared to the old regime, with deductions like Section 80C (investments), Section 80D (insurance), and HRA exemption not available in the new regime.
The new regime offers practical solutions for high-income earners. As reported by Mint, consider a ₹18 lakh CTC structured with a car lease, with basic pay at 40%. The package includes ₹2.4 lakh annually for the lease (₹20,000 a month) and another ₹2.4 lakh towards fuel and driver reimbursements. Together with EPF contributions and gratuity, these components can reduce taxable income by about ₹5.41 lakh, bringing it down to ₹12.59 lakh. After the standard deduction of ₹75,000, net taxable income falls below ₹12 lakh, resulting in zero tax under the new regime. The combined cap for EPF, NPS, and superannuation is ₹7.5 lakh, with employer contributions exceeding this limit becoming taxable. The new regime continues to be the default option, meaning taxpayers must actively opt for the old regime if they wish to claim deductions, making annual evaluation critical for optimal tax planning.
Recent practical examples demonstrate how employees can maximize savings under the new regime through strategic planning. According to a Reddit post gaining traction, an individual with a constant ₹48 lakh CTC achieved significant tax savings by restructuring salary components. The biggest savings of around ₹80,000 came from including food coupons, phone reimbursements, and Leave Travel Allowance (LTA) in the salary structure. An additional ₹45,000 was saved through employer contributions to the National Pension System (NPS), which remains available even under the new regime despite the ₹1.5 lakh Section 80C limit. The user also saved approximately ₹60,000 by carefully planning the sale of RSUs (Restricted Stock Units) within the long-term capital gains framework instead of higher slab taxation. Most importantly, the user emphasized choosing the correct tax regime based on actual calculations rather than assumptions, with the new regime offering the best savings for their specific deduction profile.
