Best Ways to Save Tax Legally in India(FY 2025-26)

After the Budget 2025 changes, planning the tax strategies for FY 2025-26 and knowing the updated tax slabs and deductions is very important. For example, the new income tax regime now lets up to ₹12 lakh of income go tax-free via a raised Section 87A rebate, and the basic exemption in the new regime is ₹4 lakh. Salaried workers still enjoy a ₹75,000 standard deduction. By combining these updates with classic income tax deductions (like Sections 80C, 80D, etc.), most taxpayers can cut their bills substantially. Below, we explore the top legal tax-saving strategies, tailored for salaried and pensioners using the latest limits and exemptions.

Salaried individuals

• Max out Section 80C (up to ₹1.5 lakh): Invest in PPF, EPF, ELSS, life insurance, NSC, tuition fees, or principal on a home loan to claim up to ₹1.5 lakh deduction on incometax. (If you’re in the 30% bracket, a full ₹1.5L 80C deduction saves about ₹45,000 in income tax.) You can also claim an extra ₹50,000 under Section 80CCD(1B) for NPS contributions. For instance, parents investing in a child’s NPS Vatsalya account could get this benefit.

• Health insurance (Section 80D): Deduct premiums paid for self, family and parents. For non-seniors, you get ₹25,000 for your family and ₹25,000 for parentsincometax.gov.in; if anyone covered is a senior citizen, the limit doubles to ₹50,000 each. (E.g., A ₹40,000 total premium could cut about ₹10,000–₹15,000 from your income tax.)

• House Rent Allowance (HRA): If you live in a rented home, claim HRA exemption. The exempt amount is the least of: actual HRA received, rent paid minus 10% of salary, or 50% of salary (metro)/40% (non-metro). Example: A metro employee with ₹6 lakh salary and ₹1.2 lakh HRA who pays ₹15k/month rent (₹1.8L/yr) can exempt about ₹1.2 lakh of HRA (saving ~₹36,000 tax at 30%).

  • You get HRA exemption for the lowest of 3 values
    • Actual HRA received from the employer.
    • Rent paid - 10% of your Basic salary.
    • 50% of your basic if you live in metro cities or 40% if you live in non-metros.
  • Example: Ayush lives in Hyderabad(non-metro) :: Basic salary = 40,000/month, HRA received = 20,000/month, Rent paid = 15,000/month
  • HRA received annually = 20,000 X 12 = 2,40,000/-
  • Rent paid annually - 10% of Basic = (15,000 X 12) - (40,000 X 0.1 X 12) = 1,80,000 - 48,000 = 1,32,000/-
  • 40% of Basic = 40,000 X 0.4 X 12 = 1,92,000/-
  • So the final HRA exempted is lowest of the above that is 1,32,000/- is deducted from the taxable income.

• Leave Travel Allowance (LTA): You can claim LTA (tax-free) for domestic travel costs for you and your family twice in a four-year block. Save on tax by submitting travel bills (e.g., ₹50,000 spent on a trip saves ~₹15,000 tax).

  • Example: Priya's Annual salary is 10,00,000, and LTA from the employer is 50,000 per year. Travelled to Kerala with family and spent 30k on flights and 15k on hotel and shopping, which cost 10k. So the total trip cost 55,000. Out of this, the travel costs of 30,000/- is deducted from the taxable income.

• Home loan deductions: Under Section 24, interest on a self-occupied home loan is deductible up to ₹2 lakh per year. (E.g., ₹2L interest saves ~₹60,000 in tax.) Principal repayment up to ₹1.5 lakh also counts under 80C. Together, home ownership can provide ~₹3.5 lakh of deductions (1.5L principal + 2L interest).

• Standard deduction and perks: You automatically get ₹75,000 off your salary income in new tax regime. Claim exempt allowances (telephone, travel) and reimbursements as allowed. If you don't get HRA, consider Section 80GG (rent for non-HRA): deduction = the least of (rent–10% of income, ₹5,000/month, or 25% of income).

• Tax regime choice: Compare old vs new income tax regimes. In the new income-tax regime you lose most deductions (no 80C/80D, etc.bajajfinserv.in) but get lower slabs – e.g. salaries up to ₹12.75 lakh (after ₹75k standard deduction) incur no tax thanks to the higher rebate. If you have many exemptions, the old income tax regime might save more (with 80C, HRA, etc)

Senior Citizens

• Higher basic exemption: In the old regime, seniors (60–80 yrs) need not pay tax on income up to ₹3 lakh, and super-seniors (80+) up to ₹5 lakh. (new income tax regime is flat ₹4L for all ages). This means a bigger no-tax threshold.

• No advance tax: If a senior’s only income is salary, pension, or interest (no business/profession), they are not required to pay advance income tax easing cash flow.

• Interest income (Section 80TTB): Seniors get a higher deduction on interest. Section 80TTB allows ₹50,000 off interest from bank/postal deposits (versus only ₹10,000 for others). For example, if a senior earns ₹60k interest on FDs, ₹50k is deducted, saving up to ₹15k in tax.

• Health expenses (Section 80D and 80DDB): Seniors can deduct up to ₹50,000 for their own health insurance (80D), and ₹50,000 for parent’s insurance. Section 80DDB lets a senior claim ₹1 lakh on treatment for specified diseases (₹40k limit for younger taxpayers). These greatly lower tax on costly medical costs.

• Other deductions: Seniors also use 80C (₹1.5L), 80CCD, 80E, etc., like everyone else. Note that HRA/LTA apply if they earn a salary, and if not then you can use 80GG if applicable.

  • 80GG -> Can claim the lowest among - (a) 5,000/month or 60,000/- per year. (b) 25% of total income (c) Actual rent paid - 10% of total income.
  • It's available to self-employed or pensioned people paying rent (but not getting HRA).

• Filing benefits: Super-seniors (80+) can even file by paper (ITR-1/4) if they wish, and all senior citizens enjoy relaxed rules on audit, etc. But it’s better to recommend e-filing for quicker processing and fewer errors.

Legally minimizing income tax requires planning: invest in Section 80C instruments, use deductions like 80D (insurance) or 24(b) (home loan interest), and choose the right tax regime. Budget 2025’s higher rebate (₹60,000 up to ₹12L) and exemption (₹4L) give middle-income earners relief. Meanwhile, sections tailored to seniors and self-employed (80TTB, 44ADA, etc.) offer extra relief.

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