Tax Saving Guide for FY 2025-26

Section 80C — ₹1.5 Lakh Deduction

The most widely used deduction, covering a combined ceiling of ₹1.5 lakh across: Employee Provident Fund (EPF) contribution, Public Provident Fund (PPF), Equity-Linked Savings Scheme (ELSS) mutual funds (3-year lock-in, the shortest among 80C options), life insurance premiums, 5-year tax-saving bank fixed deposits, National Savings Certificate (NSC), principal repayment on a home loan, and tuition fees for up to two children. ELSS is generally the most return-efficient option within this basket given its equity exposure and shortest lock-in, though it carries market risk that PPF/NSC do not.

Section 80D — Health Insurance Premium

Deduction for health insurance premiums: up to ₹25,000 for self, spouse, and dependent children (₹50,000 if you or your spouse is a senior citizen), plus an additional ₹25,000 for parents' health insurance (₹50,000 if parents are senior citizens). A preventive health check-up sub-limit of ₹5,000 is included within these caps, not in addition to them.

Section 80CCD — National Pension System (NPS)

Three distinct components: Section 80CCD(1) allows NPS contributions within the overall ₹1.5 lakh 80C ceiling; Section 80CCD(1B) provides an additional ₹50,000 deduction exclusively for NPS contributions, over and above the 80C limit — making NPS one of the few ways to push total deductions to ₹2 lakh; Section 80CCD(2) covers the employer's NPS contribution (up to 10% of salary, 14% for government employees), which is deductible without any monetary cap and, notably, is one of the few deductions still available under the new tax regime.

HRA and Home Loan Interest

House Rent Allowance (HRA): Exempt up to the least of: actual HRA received, rent paid minus 10% of basic salary, or 50% of basic salary (metro cities) / 40% (non-metro). Rent receipts are mandatory, and landlord PAN is required if annual rent exceeds ₹1 lakh.

Home loan interest (Section 24b): Up to ₹2 lakh per year for a self-occupied property; no upper limit for a let-out property (though the total loss from house property that can be set off against other income in a year is capped at ₹2 lakh, with the excess carried forward).

Other Deductions Worth Knowing

• Section 80G: Donations to eligible charitable institutions and relief funds — 50% or 100% deduction depending on the specific fund, subject to qualifying limits for some categories
• Section 80TTA/80TTB: Savings account interest deduction up to ₹10,000 (80TTA, non-senior citizens) or ₹50,000 on all deposit interest (80TTB, senior citizens)
• Section 80E: Interest paid on an education loan for higher studies (self, spouse, or children) — no upper monetary limit, deductible for up to 8 years from the start of repayment

Old vs New Regime — Which Applies to You

Nearly everything above is available only under the old regime. The new regime trades these deductions for lower slab rates and a higher basic exemption. As a rough guide: if your total eligible deductions (80C + 80D + HRA/home loan interest + NPS, etc.) exceed roughly ₹3.5-4 lakh, the old regime is usually cheaper; below that, the new regime typically wins on a pure numbers basis. The right answer depends on your exact income and claims — run both computations before deciding, since the breakeven point shifts with income level.

Tax planning works best when done early in the financial year, not in the final weeks of March — instruments like ELSS and NPS benefit from staggered investment rather than a lump sum rushed in at deadline. If you'd like your specific numbers run against both regimes, talk to a CA before you commit to any tax-saving instrument.