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How to Save Income Tax in India?

Income Tax Slab Rates in India for FY 2025-26 (AY 2026-27)

Income Tax Slabs  Rate of Taxation
Up to ₹4,00,000  Nil 
Between ₹4,00,001 and ₹8,00,000   5% of your total income that exceeds ₹4,00,000 
Between ₹8,00,001 and ₹12,00,000   ₹20,000 + 10% of your total income that exceeds ₹8,00,000 
Between ₹12,00,001 and ₹16,00,000   ₹60,000 + 15% of your total income that exceeds ₹12,00,000 
Between ₹16,00,001 and ₹20,00,000   ₹1,20,000 + 20% of your total income that exceeds ₹16,00,000 
Between ₹20,00,001 and ₹24,00,000   ₹2,00,000 + 25% of your total income that exceeds ₹20,00,000 
Above ₹24,00,000   ₹3,00,000 + 30% of your total income that exceeds ₹24,00,000 

Income Tax Slabs Rate of Taxation
up to ₹2,50,000  Nil
Between ₹2,50,000 and ₹5,00,000  5% of your total income that exceeds ₹2,50,000
Between ₹5,00,000 and ₹10,00,000  ₹12,500 + 20% of your total income that exceeds ₹5,00,000
Above ₹10,00,000  ₹1,12,500 + 30% of your total income that exceeds ₹10,00,000

An additional health and education cess of 4% of the total tax payable is levied. A surcharge of a fixed percentage of the total income also has to be paid by people earning more than ₹50 Lakh annually. 

Check out the surcharge rates below, effective from April 1, 2023.

Taxable Income Surcharge (New Tax Regime)
For those with an income above ₹50 Lakh but below ₹1 Crore  10%
For those with an income of above ₹1 Crore but below ₹2 Crore 15%
For those with an income of above ₹2 Crore but below ₹5 Crore 25%

Remember that before Budget 2023, the highest surcharge on income over ₹5 Crore was 37%, which has been reduced to 25%, effective from April 1, 2023, with all the other surcharge rates remaining the same.

Even though such rates might seem overwhelming, the Central Government maintains various provisions under the Income Tax Act of 1961 to ease your annual financial burden.

You can learn comprehensive details regarding how to save income tax in India in this article, which will help you save substantially through numerous waivers and exemptions.

9 Best Ways to Save Tax on Salary Legally in India for FY 2024-25

Section Benefit
Section 80C  Deductions of up to ₹1.5 lakhs on the total annual income spent towards repayment of the principal borrowed amount. 
Section 24(b)  Deduction on the home loan interest for purchasing, constructing a new house, or renovating or repairing an existing home. Tax exemption on home loan interest for both rental and self-occupied property, valued up to ₹2 Lakh annually. 
Section 80EEA  Annual tax liability on home loan interest for first timers, up to ₹50,000. 

Additionally, if you let out the newly acquired property on rent, the entire interest component is exempt from annual income tax calculations.

Scheme Benefit Lock-in Period
ELSS (Equity Linked Savings Scheme)  Tax exemption of up to ₹1.5 lakhs. 3 years
Public Provident Fund (PPF)  Contribution made towards the PPF account, interest earned, and maturity amount, all are tax-exempt, up to a maximum of ₹1.5 lakhs. 15 years
National Savings Certificate (NSC) 
  • The amount invested in this tax saving scheme in India is eligible for tax exemption up to ₹1.5 lakhs.
  • However, interest earned is not tax-free.
5 years 
National Pension Scheme (NPS) 
  • Up to ₹1.5 lakh under section 80C of the IT Act. Additional deduction up to ₹50,000 under Section 80CCD (1b).
  • If 14% of the basic salary is contributed by the employer, the amount is not taxed.
Until retirement
Bank Fixed Deposits  Deduction of up to ₹1.5 lakh per year 5 years
Senior Citizen Saving Scheme (SCSS) - only for individuals above 60 years  Deduction of up to ₹1.5 lakhs is applicable for TDS. 5 years (can be extended to 3 more years)
Sukanya Samriddhi Yojana (SSY)  Investments are tax-exempt up to ₹1.5 lakhs. The interest compounded annually is also tax-exempt. The maturity and withdrawal amounts are also tax-exempt. 21 years
Unit Linked Insurance Plan (ULIP)  Tax deduction up to ₹1.5 lakhs on the policy premium. Top-ups are also eligible for tax deductions under Sections 80C and 10D. 5 years
Tuition Fees  Tax deductions up to ₹1.5 lakhs are available on tuition fees paid for your child’s education, for a maximum of two children per individual. Not Applicable

Also, if total capital gains are below ₹1 lakh, no tax has to be paid on the profits earned. All investments amounting up to ₹1.5 Lakh can be claimed for tax waivers under Section 80C as well.

Eligibility Deduction Under Section 80D
Health insurance for individuals, spouse, children (below 60 years) Up to ₹25,000 
For individuals and parents (below 60 years) Up to ₹50,000 (₹25,000 + ₹25,000) 
For individuals (below 60 years) and Senior Citizen parents Up to ₹75,000 (₹25,000 + ₹50,000) 
For individuals and parents (both above 60 years) Up to ₹1,00,000 (₹50,000 + ₹50,000) 

The above rates are as per the Income Tax Act, 1961 as amended from time to time.

Provision for tax benefits on the total amount spent on health check-ups is also present under Section 80D, with a maximum cap of ₹5,000. Such exemptions are included within the premium waivers amounting to ₹25,000.

Section Benefits
Section 80DDB  Expenditure incurred by individuals for medical treatment of specified diseases is exempted from tax. Medical bills of up to ₹40,000 for the treatment of specific diseases can be submitted to receive tax waivers. Senior and super senior citizens get an extended benefit amounting to ₹1 lakh. 
Section 80DD  If you host a dependent family member who has a permanent disability, you can claim a tax exemption on all expenses borne for funding the livelihood of that person. Up to ₹75,000 for individuals with over 40% disability. Up to ₹1,25,000 for people who suffer from 80% or higher disability. 
Section 80E  You can forego any tax paid on the interest on education loans. However, such benefits are only applicable for the first eight years of loan repayment. 
Section 80TTA  Deduction on interest earned from the bank savings account, up to ₹10,000. 

All these points will help you know how to save tax on salary and substantially reduce your total taxable income for a stipulated financial year. Make sure you submit the income tax return form and Form 16 provided by your employer to get subsequent proceeds.

FAQs about Tax Saving Investments in India