How to Save Income Tax in India — FY 2025-26 Guide

The Tax Saving Checklist for Salaried Employees

Most salaried Indians overpay tax simply because they don't claim all the deductions they're entitled to. Here's a complete checklist for FY 2025-26.

Section 80C — ₹1.5 Lakh Deduction

The most popular deduction — covers a wide range of investments and expenses:

• EPF contribution — already deducted from salary, counts toward 80C
• PPF — Public Provident Fund, 7.1% tax-free returns
• ELSS mutual funds — best returns potential, 3-year lock-in
• Life insurance premium — for self, spouse, children
• Home loan principal repayment
• 5-year bank FD — tax-saving FD
• Children's tuition fees — for up to 2 children
• NSC — National Savings Certificate

Maximum deduction: ₹1,50,000. Note: EPF contribution is automatically included — most employees have already used a significant portion of this limit.

Section 80CCD(1B) — Extra ₹50,000 via NPS

This is the most underutilised deduction. NPS investment of ₹50,000 gives an additional deduction over and above the ₹1.5L 80C limit.

Tax saving at 30% bracket: ₹50,000 × 30% × 1.04 = ₹15,600/year. Over 20 years, that's ₹3.12 lakh in tax saved — just from this one deduction.

Section 80D — Health Insurance ₹25,000

• Self + spouse + children: max ₹25,000/year
• Parents below 60: additional ₹25,000
• Senior citizen parents: additional ₹50,000
• Maximum total: ₹75,000 (if parents are senior citizens)

If you don't have health insurance yet, this is the single best reason to get it — it saves tax AND protects against medical emergencies.

HRA Exemption — Often the Biggest Saving

If you live in rented accommodation, HRA exemption can save ₹1–5 lakh annually depending on your salary and rent.

Key rules:

• Only available under old tax regime
• Must actually pay rent — keep rent receipts
• If annual rent exceeds ₹1 lakh, landlord's PAN is mandatory
• Cannot claim HRA if living in own house
• Metro cities (Mumbai, Delhi, Kolkata, Chennai): 50% of basic salary
• Non-metro: 40% of basic salary

Section 24(b) — Home Loan Interest ₹2 Lakh

If you have a home loan on a self-occupied property, interest paid is deductible up to ₹2 lakh per year under the old regime. This is one of the biggest deductions available — at 30% bracket, ₹2L deduction saves ₹62,400/year in tax.

Standard Deduction — Automatic

All salaried employees get a standard deduction automatically — no investment required:

• New regime: ₹75,000
• Old regime: ₹50,000

Quick Tax Saving Priority Order

1. Maximise EPF (automatic) + ensure 80C is fully utilised
2. Get health insurance if you don't have one (80D + protection)
3. Invest ₹50,000 in NPS for 80CCD(1B) if in 20–30% bracket
4. Claim HRA if renting — keep receipts
5. Compare new vs old regime with all deductions entered