Top 10 Tax-Saving Tips for AY 2025-26

Here are the Top 10 Tax-Saving Tips for AY 2025-26, along with a comparison of tax liability under the Old Tax Regime (OTR) and the New Tax Regime (NTR) for three different salary scenarios: ₹8 lakh, ₹12 lakh, and ₹15 lakh.

Top 10 Tax-Saving Tips

1. Section 80C Investments
   • Deduction of up to ₹1.5 lakh for investments in PPF, ELSS, NSC, LIC premiums, etc.
     
   • Example: Investing ₹1.5 lakh in PPF reduces taxable income by ₹1.5 lakh under OTR.
2. National Pension System (NPS) – Section 80CCD
   • Additional ₹50,000 under 80CCD(1B).
     
   • Example: Opting for NPS reduces taxable income under OTR.
3. Home Loan Benefits (Section 24 and 80EEA)
   • Interest on a home loan (₹2 lakh) under Section 24 and additional benefits under 80EEA for first-time buyers.
     
   • Example: A salaried individual with a home loan saves significantly under OTR.
4. Health Insurance (Section 80D)
   • Deduction for health insurance premiums
     
     • Self + Family: ₹25,000
     • Parents (Senior Citizens): ₹50,000
   • Example: Paying ₹40,000 for parents’ insurance and ₹20,000 for own policy reduces taxable income by ₹60,000.
5. Education Loan Interest (Section 80E)
   • Deduction for interest paid on education loans for self or dependents
     
   • Example: Paying ₹1 lakh as interest saves tax under OTR.
6. House Rent Allowance (HRA)
   • If staying in rented accommodation, HRA can be claimed partially or fully exempt under OTR.
     
   • Example: ₹20,000 monthly rent can reduce taxable income by ₹1.6 lakh (approx).
7. Leave Travel Allowance (LTA)
   • Claim tax-free LTA for travel expenses incurred on domestic travel (2 journeys in 4 years).
     
   • Example: A ₹50,000 travel bill for the year is exempt.
8. Standard Deduction
   • A flat deduction of ₹75,000 for salaried individuals under both OTR and NTR.
9. Charitable Donations (Section 80G)
   • Donations to specified charitable organizations are eligible for deductions.
     
   • Example: Donating ₹50,000 to a PM Relief Fund gets 100% deduction.
10. Tax-Free Allowances and Perquisites
    • Structure salary to include tax-free allowances like food coupons (₹50,000), books and periodicals, etc.

Example 1: Tax Saving Using All Possible Deductions (Old Tax Regime)

Scenario

Rahul, aged 35, earns a salary of ₹12,00,000 annually. He plans his taxes using all available deductions.

Breakdown of Savings

Tax-Saving Instrument	Investment/Expense (₹)	Section	Taxable Income Reduced (₹)
ELSS Funds	1,50,000	80C	1,50,000
NPS (Additional Contribution)	50,000	80CCD(1B)	50,000
Home Loan Interest	2,00,000	24(b)	2,00,000
Health Insurance Premium	30,000	80D	30,000
Donation to PM Relief Fund	50,000	80G	50,000
Standard Deduction	75,000	Standard	75,000

Calculation of Taxable Income

• Gross Salary: ₹12,00,000
  
• Total Deductions: ₹5,55,000
  
• Taxable Income: ₹12,00,000 – ₹5,55,000 = ₹6,45,000

Tax Payable Under Old Tax Regime

Using the old tax slabs, Rahul’s tax liability is calculated as ₹37,500 (after rebates).

Example 2: Minimal Deductions and New Tax Regime

Scenario

Priya, aged 30, earns ₹15,00,000 annually. She has minimal tax-saving investments and wants simplicity.

Tax-Saving Measures Under New Tax Regime

• Standard Deduction: ₹75,000 is automatically applied.
  
• Tax Calculation

Income Slab	Rate (%)
₹0 – ₹3,00,000	0%
₹3,00,001 – ₹7,00,000	5%
₹7,00,001 – ₹10,00,000	10%
₹10,00,001 – ₹12,00,000	15%
₹12,00,001 – ₹15,00,000	20%

1. Income after standard deduction
   • ₹15,00,000 – ₹75,000 = ₹14,25,000.
     
2. Tax computation by slab
   • From ₹0 to ₹3,00,000: Tax = ₹0.
   • From ₹3,00,001 to ₹7,00,000
     • Tax = (₹7,00,000 – ₹3,00,000) × 5% = ₹4,00,000 × 5% = ₹20,000.
   • From ₹7,00,001 to ₹10,00,000
     • Tax = (₹10,00,000 – ₹7,00,000) × 10% = ₹3,00,000 × 10% = ₹30,000.
   • From ₹10,00,001 to ₹12,00,000
     • Tax = (₹12,00,000 – ₹10,00,000) × 15% = ₹2,00,000 × 15% = ₹30,000.
   • From ₹12,00,001 to ₹14,25,000
     • Tax = (₹14,25,000 – ₹12,00,000) × 20% = ₹2,25,000 × 20% = ₹45,000.
3. Total tax amount:
   • ₹20,000 + ₹30,000 + ₹30,000 + ₹45,000 = ₹1,25,000.
4. Final Tax Amount: ₹1,25,000

Conclusion

Priya saves time and effort by opting for the new tax regime while maintaining simplicity.

Also Read :- NEW INCOME TAX RULES 2025 ON THE CASH TRANSACTIONS

Key Takeaways

• Individuals with multiple deductions benefit most from the Old Tax Regime.
  
• Those who prefer simplicity or have minimal deductions should opt for the New Tax Regime.

You can contact Taxcure India for consultancy regarding tax planning or further clarification. Let me know if you’d like assistance with specific contact details or drafting an inquiry message!