The Indian taxation and payroll ecosystem is rapidly transforming and undergoing a structural shift. The implementation of new labour codes, combined with evolving income-tax rules, is completely changing the way how salaried individuals optimise taxes under the new tax regime.
Furthermore, what was once perceived as a simple, no-deduction system is now emerging as a framework driven by prudent compensation design and employer-led benefits. These developments have sparked debate over how the new labour codes can increase tax savings for those opting for the new tax regime. To explore this, Mint spoke with prominent Chartered Accountants to gauge their views on the recent changes.
Expert views
CA Ruchika Bhagat, MD, Neeraj Bhagat & Co. explained, “The new labour codes—by mandating a higher basic pay component—have indirectly reshaped salary structures, and this has created a more conscious shift toward structured, compliant tax-saving avenues, especially for those opting for the new tax regime.
“While the new regime limits traditional deductions, it does not eliminate tax efficiency—it simply changes the strategy. Employees can still optimise their compensation through smart structuring. For instance, employer contributions to NPS (Section 80CCD(2)) remain one of the most powerful tax-saving tools even under the new regime. Similarly, car lease arrangements can significantly reduce taxable income when structured correctly, as the taxable perquisite value is often lower than the actual cost borne by the employer.”
She further added, “Additionally, meal coupons, gift vouchers, and other non-cash benefits continue to offer tax-efficient perks within prescribed limits. Components like the standard deduction, now available under the new regime, also provide direct relief. The broader shift is clear: tax planning is moving away from end-of-year investments to smart salary design and employer-led benefits. Those who proactively restructure their CTC—rather than relying on traditional deductions—stand to gain the most in this evolving framework.”
CA Chandni Anandan, Tax Expert at ClearTax, added, “Under the new tax regime, the revised labour-code-driven wage structure (with a higher basic and expanded PF/NPS-linked benefits) has boosted the quantum of tax-free employer contributions to retirement funds, even though Section 80C is not available.
“Structured salary components like company-sponsored car lease, employer-contributed NPS, and tax-free meal coupons allow salaried employees to channel more of their CTC into exempt or low-tax perks, effectively lowering taxable income and enhancing annual tax savings.”
Meanwhile, CA (Dr.) Suresh Surana is of the view that, “Under the IT Rules, 2026 (effective FY 2026–27), car lease benefits, such as fuel, driver, maintenance, are taxable perquisites, with valuation clearly linked to official vs personal use through prescribed monthly values or actuals. Employers must factor these into salary and TDS.
“Meal card benefits remain tax-efficient only if separately structured and documented in payroll; the exemption is increased to ₹200 per meal and extended to both tax regimes. Overall, taxation hinges on proper usage classification and compliant structuring.”
Rethinking Tax Planning: How new labour codes can boost tax savings in the new tax regime?
Therefore, as discussed by the nation’s prominent tax experts, the new labour codes have brought several important changes. They have standardised salary structures by increasing the basic pay component that has the potential to directly enhance employer-linked contributions, such as the provident fund (PF) and NPS. These benefits, along with structural benefits such as car lease and meal vouchers, are either holistically tax-exempt or taxed in a favourable manner.
These changes and shifts can enable salaried employees to reduce taxable income without relying on traditional deductions. All they might need is proper professional guidance from certified tax planning and financial advisors.
Furthermore, tax savings will now be driven by strategic salary structuring and planning. This will make the new tax regime more attractive, efficient, and easier for a wider segment of taxpayers to opt into.
Why is understanding the new tax regime crucial for maximising tax savings?
A clear understanding of how the new tax regime works and its implications can help taxpayers optimise their salary structures to extract the maximum benefits, while following the rules and regulations of the tax authorities and maintaining complete transparency and compliance. This way, they can maximise their take-home income under evolving rules and provisions of the new Income Tax Act, 2025, and reduced deduction frameworks.
The significance of consulting a financial advisor is key to optimising tax savings
With the introduction of the Income‑tax Act, 2025, effective from 1 April 2026 (for FY 2026–27 onwards), taxpayers will have to adapt to a new statutory framework, whereas FY 2025‑26 continues to be governed by the Income‑tax Act, 1961. These doubts must be addressed effectively.
Furthermore, as tax planning evolves from deduction-based strategies to compensation-driven structuring, consulting a certified financial advisor becomes nearly indispensable. An expert who has knowledge of both the acts, along with the new changes introduced, can be of immense help. They can analyse and guide on whether the new tax regime aligns with and works well for an individual’s earning profile. Then guide them on restructuring salary components in accordance with the new rules to maximise tax efficiency.
They can also help ensure proper use of employer-provided benefits, such as NPS contributions, allowances, and prerequisites, while maintaining compliance with tax authorities. As a well-aware tax-paying citizen, your basic focus should be on both compliance, following the rules and also ensuring savings to bring down your overall tax liability if possible.
Without professional tax planning guidance, you can easily miss important details and overlook valuable information and opportunities. You might even misinterpret complex rules because the rules and sections in the Income Tax planning overlap, and provisions are read together, which can make the process a little complicated for individuals without legal and taxation-related knowledge.
Therefore, in a rapidly evolving taxation environment, taking into account the views of tax consultants and experts discussed above. It is wise for you to first understand these changes and new provisions, and to seek proper guidance to ensure that you significantly improve both tax savings and long-term economic outcomes for yourself and your family.
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