1Which tax regime is better for IT professionals?
The new regime, unless your deductions are large. With high HRA, full 80C, NPS and a home loan, the old regime can still win — so compare both every year, since a raise or new loan can flip it.
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ArticleIT and software professionals usually earn salary, often with allowances, ESOPs and sometimes foreign-assignment income — which makes the regime choice and a few salary-structure moves worth real money. Here's how to save tax as an IT professional.
Reviewed by CA Harika Chebolu, FCA · Last updated 2026-06-13
Quick answer
From HRA and NPS to ESOP timing and the old-vs-new regime call, software professionals have several levers to cut tax. Here are the best ones.
The new regime gives a Rs 75,000 standard deduction and nil tax up to Rs 12,00,000 with almost no other deductions; the old regime is worth it only if your HRA, 80C, NPS, home-loan interest and 80D together beat that. Run both every year — a salary hike or a new home loan can flip the answer.
If you live in rented accommodation and your salary includes HRA, the exemption is the least of: actual HRA, rent paid minus 10% of salary, or 50% of salary in a metro (40% non-metro). Keep rent receipts, and your landlord's PAN if annual rent exceeds Rs 1,00,000. This is an old-regime benefit.
In the old regime, fill your Rs 1,50,000 under 80C (EPF, ELSS, PPF, insurance), then add the Rs 50,000 NPS deduction under 80CCD(1B) on top. If your employer offers NPS under 80CCD(2), that employer contribution is deductible too — up to 14% of basic in the new regime — and is one of the few benefits that survives in the new regime.
Equity awards are taxed first as a perquisite when they vest/exercise and again as capital gains when you sell. The timing of exercise and sale, and whether the shares are foreign or Indian, change the tax — so plan the sale year and don't forget to report foreign shares in your return.
If you've been on an onsite assignment, your residential status and foreign income reporting matter — get them right to avoid notices. And whatever the regime debate, keep health insurance under 80D (Rs 25,000, plus up to Rs 50,000 for senior parents) on your old-regime checklist.
The new regime, unless your deductions are large. With high HRA, full 80C, NPS and a home loan, the old regime can still win — so compare both every year, since a raise or new loan can flip it.
Twice — as a perquisite when they vest/exercise, and as capital gains when you sell. Plan the exercise and sale timing, and report foreign shares; the holding period decides the gains treatment.
Yes, in genuine cases — for example, renting in your work city while paying a home loan elsewhere. Both are old-regime benefits; keep clean documentation for each.
Got ESOPs or onsite income to sort out? Write to the firm and we'll get the regime choice and reporting right.