New tax rules unlock higher take-home pay—here’s how to make the most of them

With the new tax proposals in place, individuals now have fresh avenues to enhance their take-home pay. Changes in tax brackets and policy tweaks on savings and investments can be smartly utilised to reduce taxable income. By aligning salary components with tax benefits and making informed financial decisions, one can effectively retain a larger portion of their earnings while ensuring compliance with the latest tax regulations.

"One often-overlooked way to optimise finances is through everyday spending and reward utilisation," says Amit Koshal, Co-founder and CEO of TWID. "Billions of rupees in reward points go unused every year, locked away in credit cards, airline miles, and retail loyalty programmes," he adds.

In industries such as banking, fintech, and e-commerce, where customer engagement is driven by rewards and incentives, these points can be transformed into valuable financial assets. Instead of letting them expire, they can be redeemed for essentials like groceries, travel, or subscriptions, effectively freeing up cash flow. This, in turn, allows individuals to redirect saved cash into high-growth investment avenues like mutual funds, stocks, or digital gold.

With greater control over financial choices, individuals can combine smarter spending with disciplined investing to secure their financial future. The key isn’t just earning more—it’s about leveraging the right financial tools to optimise spending and wealth creation.

In the Union Budget of February 2025, India's Finance Minister Nirmala Sitharaman introduced significant changes to the income tax framework, particularly under the new tax regime. These changes are designed to enhance the disposable income of taxpayers, especially targeting the middle class to stimulate consumer spending and economic growth. Here's how one can leverage these new tax proposals to increase take-home income:

1) Leverage the increased tax-free income threshold

Zero tax up to ₹12 lakh: Under the new tax regime, individuals earning up to ₹12 lakh annually are now exempt from paying any income tax, thanks to the enhanced rebate under Section 87A. This means if your income is below this threshold, your entire salary could be disposable income.

Strategy: "If you're on the cusp of this limit, consider tax planning to ensure you don't exceed this amount. This might include deferring bonuses or optimising your income. Assessees under presumptive taxation can benefit immensely from increased tax slabs. Investment in regular income-generating instruments like IDEW (erstwhile Dividend Option) under debt mutual funds and even bank FDs should make a comeback. Even annuities (pension) become relatively attractive," says Atul Shinghal, Founder and CEO of Scripbox.

2) Standard deduction utilisation

Standard deduction for salaried individuals: The standard deduction has been retained at ₹75,000 for salaried individuals, effectively reducing taxable income.

Strategy: "Ensure you claim this deduction while filing your returns. For those with incomes just over ₹12 lakh, this deduction could push net taxable income back into the tax-free bracket, especially when combined with other deductions," says Shinghal.

3) Choose the right tax regime

New vs. old tax regime: The new regime offers lower tax rates with fewer exemptions, while the old regime allows for numerous deductions and exemptions.

Strategy: Use tax calculators to compare which regime benefits you more. If you have minimal investments or expenses that qualify for deductions, the new regime's straightforward lower rates might be more advantageous. However, if you benefit significantly from deductions under sections like 80C, 80D, or home loan interest, sticking with the old regime might yield higher savings.

4) Plan for long-term benefits

Long-term capital gains: With the new tax slab, consider investments that benefit from long-term capital gains tax exemptions, like equity mutual funds held for more than one year, which are taxed at a lower rate.

Strategy: "Shift towards long-term investments rather than short-term speculative gains to benefit from lower tax rates on capital gains," says Shinghal.

5) Stay updated on TDS and TCS changes

Increased thresholds: The budget proposes changes in Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) thresholds, which could influence cash flow for various transactions. TDS on interest from bank deposits has been increased to ₹1 lakh from ₹50,000. This will help senior citizens since less tax will get blocked in TDS, which they typically claim back by filing tax returns at the end of the year.

Strategy: "Keep abreast of these changes to manage cash flow better. For instance, the increased TCS threshold on overseas remittances under LRS to ₹10 lakh can help in planning international transactions more efficiently," says Shinghal.