How to Save Income Tax in India?

Tax planning to save income tax in India is important to reduce the tax burden so that it can significantly enhance your savings and investments. For effective tax saving, taxpayers need to identify and make the best use of various instruments available under the IT Act for tax saving and wealth growth, such as various deductions and exemptions under sections like 80C, 80D, and 80G.

Understanding these options and planning your finances accordingly can help you make the most of the available tax benefits and ensure a more secure financial future.

Since FY 2025-26 has kicked in, it's time for individual taxpayers in India to begin their financial planning to maximise savings on income tax this year.

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Income Tax Slab Rates
Best Ways to Save Tax
Frequently Asked Questions

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

Income Tax Slabs for FY 2025-26 - New Tax Regime

For FY 2025-26, the new tax regime is the same for all age groups. The revised tax rates after Budget 2025 are:

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 for FY 2025-26 - Old Tax Regime

The old tax regime for FY 2025-26 remains unchanged, and the tax slabs are as follows for individuals under 60 years of age.

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

We tend to invest in various items that enhance our quality of life, but can also lead to severe financial strain. To ease this burden substantially, the government provides help in the form of tax-saving investments to save direct taxes levied on your total salary.

Note that after April 1, 2023, some of these tax-saving instruments are not available under the new tax regime. Taxpayers must verify which benefits are applicable to them as per their opted regime before investing in tax-saving instruments.

1. Opt for the Right Income Tax Regime

Taxpayers can choose from two tax regimes to calculate their taxes. The new income tax regime has been revised after Budget 2025. It allows you to claim a full tax refund if your annual income is up to ₹12 lakhs and a standard deduction of up to ₹75,000; however, no HRA and other deduction benefits are available.

As for the old income tax regime, all the existing tax exemptions like HRA and deductions on interest on home loans, interest income, etc., are available. However, the no tax limit is set up to only ₹2.5 lakhs.

Therefore, it is necessary that taxpayers compare the potential ways to reduce taxable income under both regimes to make an informed decision.

2. Avail a Home Loan and Enjoy Tax Benefits | Old and New Tax Regime

Availing a home loan is associated with dual benefits, as it comes with diminished tax liability, along with the satisfaction of owning your own home.

Many government-mandated schemes, such as PMAY (Pradhan Mantri Awas Yojana) and DDR (Delhi Development Authority) Housing scheme, cater towards making housing affordable, while Section 80C, 80EEA, and 24(b) diminish monetary liability through reduced tax burden.

You can avail of home loan benefits under the following sections:

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.

3. Tax Saving Options Under 80C | Old Tax Regime

Investments in the capital market and government-mandated schemes can lead to wealth accumulation through higher returns, as well as tax-saving benefits.

Numerous government-mandated tax-saving schemes in India also offer high returns on total investments along with tax waivers. Individuals can claim up to ₹1.5 lakhs spent on such investments as tax waivers on total annual income, under Section 80C of the Income Tax Act.

Individual taxpayers can avail of tax exemptions under Section 80C by investing in the following tools:

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.

4. Buy a Health Insurance Policy | Old Tax Regime

With rising medical costs in India, coupled with deteriorating health quality owing to multiple factors, availing health insurance is becoming a necessity. Such insurance policies reduce the financial strain on individuals and their respective families at times of failing health conditions.

Health insurance tax benefits are extended by the government to stimulate individuals to avail such insurance policies, which allow them to get quality healthcare at premier medical institutions for zero or low additional charges.

Individuals can claim tax deductions on the portion of their annual taxable income spent towards premium payments under section 80D. Different amounts are exempted from such income tax calculations, depending on the age of the insured, respectively.

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.

5. Opt for Life Insurance Plans | Old and New Tax Regime

Life insurance is one of the crucial income tax-saving options, which also ensures the financial security of one’s family. However, the Union Budget 2023 proposed changes in the tax rules and exemptions for life insurance policies.

For policies issued on or after April 1, 2023, individuals can claim tax exemption on the maturity amount of a life insurance policy ONLY IF the total yearly premium is up to ₹5 lakhs or if the aggregate of premiums from multiple policies is up to ₹5 lakhs.

However, taxpayers can continue to claim the tax exemption for the sum assured received on the premature demise of the insured under Section 10(10D).

For insurance policies issued till 31st March 2023, the tax benefits of up to ₹1.5 Lakh spent on annual premium can be claimed under Section 80C, provided it is less than 10% of the total sum assured, if the policy is taken after April 1, 2012. In case the policy was availed before April 1, 2012, claims under Section 80C can be made if the total premium payments do not exceed 20% of the sum assured.

Purchase or renewal of life insurance cover, along with annuity payments on such policies through yearly salary is eligible for tax waivers of up to ₹1.5 Lakh under Section 80CCC as well.

Under Section 80CCD(1), only certain pension funds under Section 23AAB are eligible for waivers of up to ₹1.5 lakhs.

Also, if individuals decide to invest in Unit Linked Insurance Plans (ULIP), the insurance section enjoys tax waivers up to ₹2.5 lakh in a financial year. However, ULIPs come with a minimum lock-in period of five years, prior to which, no money can be withdrawn from the scheme.

The portion of investment channeled to the stock market also does not attract any Long-term Capital Gains (LTCG) tax.

6. Exemptions on Rented Premises | Old Tax Regime

Tax exemptions under House Rent Allowance (HRA) are granted under Section 10(13A). Your salary break-up must include an HRA component to avail compensation against the same.

However, the total tax exemption on rent paid is calculated as the minimum value of three components, stated as:

Annual HRA received.
50% of the yearly salary if the individual is residing in a metro city (40% in case of non-metro cities).
Total annual rent – 10% of the basic salary.

In case your monthly income does not include the HRA component, you can claim tax benefits on yearly rental expenses under Section 80GG. The total deductions on income tax are calculated against the minimum value of the following conditions:

Rent payment of up to ₹5,000 per month.
25% of the gross total income.
Total rent minus 10% of basic salary.

Thus, you can learn about how to save tax in India on salary through house rent allowance by keeping in mind the above-stated points.

7. Donate to Charity | Old Tax Regime

Donations made to specific organizations in cash are eligible for tax waiver under Section 80G of the Income Tax Act. Wire and bank transfers, on the other hand, enjoy complete or partial tax exemptions, respectively.

If you are donating to an organisation facilitating scientific research or rural development, you are eligible to enjoy deductions under Section 80GGA.

Partial waivers in case of cash donations are granted, while transfers made through cheque or draft enjoy a complete tax waiver.

8. Support a Political Party | Old Tax Regime

All donations made to political parties or contributions to electoral trusts are eligible for tax waivers under Section 80GGC of the Act of 1961.

The entire amount donated to your preferred political party is exempt from any income tax calculations, provided the organisation is registered under Section 29A of the Representation of People Act of 1951.

Such donations must be made through wire or bank transfers; cash deposits are not allowed.

9. Tax Saving Options Other than 80C | Old Tax Regime

All the above methods will give an inclusive idea about how to reduce tax on salary. Apart from 80C tax saving options, several other tax saving instruments can be considered such as:

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

All

What is meant by taxes saving instruments?

Tax-saving instruments are investments that help you save tax legally. These financial tax-saving options allow you to reduce your tax liabilities by allowing you to claim deductions, exemptions, and rebates on your actual income tax.

How much tax can I save on my salary?

The amount of tax you can save on your salary depends on various factors including your income, income tax bracket, eligible tax deductions and exemptions you can claim, and other individual factors.

What are the best tax strategies for high income earners?

Here are the best tax-saving options for salaried people in India:

Claim 80C investments to save up to ₹1.5 lakhs against PPF, home loan, etc.
Claim a deduction of up to ₹25,000 under Section 80D for medical insurance.
Claim a deduction of up to ₹50,000 on investments made under Section 80EE against home loan interest.

What are some common tax saving investments?

Here are the best tax-saving schemes in India:

PPF, ELSS, EPF, NPS, NSC, etc.
Life Insurance Plans
Health Insurance Plans
Bank FD
Senior Citizen Savings Scheme
Housing Loans
Donations to Charity

How can I save tax other than 80C investments?

Here are the best income tax saving options other than Section 80C:

National Pension Scheme (NPS)
Interest on education loan (Section 80E)
Home loans and rental property
House Rent Allowance (Section 80GG)
Health insurance (Section 80D)
Medical treatment under Section 80DDB
Donations (Section 80G)

Do I have to pay tax on the accrued interest on my savings account?

You can claim tax waivers on interest earned on savings accounts, provided the total interest income is less than ₹10,000. Such a tax rebate is given under Section 80TTA of the Income Tax Act.

Who can claim HRA exemption on tax?

Salaried employees who pay rent and receive House Rent Allowance (HRA) as part of their salary can claim HRA exemption to reduce their taxable salary based on their city and HRA component.

What is the income tax on ₹12 lakhs salary?

You do not have to pay any income tax under the new income tax regime as per the Union Budget 2025, if you earn up to ₹12 lakhs, as you can claim a rebate of ₹60,000 under section 87A and a standard deduction of ₹50,000 under old regime and ₹75,000 under new regime.

Which tax regime should I choose to save tax on ₹12 lakhs salary?

If you earn ₹12 lakhs per year, you should go for the new tax regime as the tax liability under the new tax regime up to ₹12 lakhs salary is zero.

How to save tax for salary above ₹15 lakhs?

For salary above ₹15 lakhs, you can save tax using various exemptions such as HRA, LTA, and reimbursements to lower your net salary income. Additionally, income tax deductions under Section 80C, 80D, and 80E for investments, home loan premiums, health insurance premiums, and education loan interest can further decrease your taxable income. Remember you just need to opt for the right income tax regime to save maximum tax.

Which income tax deductions are available under the new tax regime?

Standard deduction of ₹75,000
Rebate of ₹60,000 u/s 87A from FY 2025-26
Employer contribution to NPS u/s 80CCD(2), up to 14% of salary
Agniveer Corpus contribution by the government u/s 80CCH(2)
Interest on home loan for let-out property

What is the new income tax rule for life insurance, as per Union Budget 2023?

For policies bought after April 1, 2023, the maturity income from a life insurance policy will be taxed if the total yearly premium or aggregate of premiums from multiple policies is more than ₹5 lakhs. However, the new rule will not affect the ULIP plans.

What are the eligible deductions under Section 80C?

The eligible Section 80C tax saving options include life insurance premiums, public provident fund contributions, Equity Linked Savings Scheme investments, Sukanya Samridhhi Yojana contributions, Senior Citizens Savings Scheme investment, Bank Fixed Deposits, home loan principal repayment and National Savings Certificate contribution.

Can I save tax by investing in mutual funds?

Yes, investing in mutual funds can help you save on taxes, as they are considered tax-saving instruments. By doing so, you can claim deductions under Section 80C of the Income Tax Act. Consider using an income tax calculator to determine the amount eligible for deduction.

Can HRA exemption help in saving tax for salaried individuals?

Yes, the HRA exemption can help salaried individuals reduce their tax bills, which are included in their salary structure. However, this exemption is currently only available under the old tax regime. Use an HRA exemption calculator to find out how much you can claim. Once you know your eligible amount, you can file your tax returns and claim the exemption.