Most salaried Indians pay more tax than they legally have to. Not because they cheat — because they don't know all the deductions they're entitled to. This guide covers every major legal tax-saving option for FY 2025-26. If you're in the old tax regime, these apply directly. If you're in the new regime, some still apply.
⚠️ Important: Most deductions below apply only to the Old Tax Regime. The new tax regime has lower rates but fewer deductions. Use our Income Tax Calculator to determine which regime saves you more.
The most commonly used deduction. Eligible investments:
Maximum benefit at 30% slab: ₹1.5L × 31.2% = ₹46,800 saved per year.
This is in addition to the ₹1.5 lakh 80C limit. Investing ₹50,000 in NPS (National Pension Scheme) gives an additional ₹50,000 deduction. At 30% slab, that's ₹15,600 more saved. Total 80C + 80CCD(1B) = ₹2 lakh deduction.
Deduction on health insurance premiums:
This deduction is available even in the new tax regime for senior citizen parents. Don't miss it.
Interest paid on home loan for self-occupied property is deductible up to ₹2 lakh per year. For a let-out property, there is no upper limit. This is one of the largest deductions available for homeowners in the old regime.
If you live in a rented house and receive HRA as part of salary, a portion is exempt from tax. The exempt amount is the minimum of:
If you pay rent to parents (with proper rent agreement and PAN), this also qualifies.
Available to all salaried employees and pensioners automatically — no investment needed, no proof required. This ₹50,000 is deducted from gross salary before calculating tax in both old and new regimes.
Interest from savings bank accounts up to ₹10,000 is exempt (80TTA). For senior citizens, this extends to ₹50,000 on savings account, FD, and RD interest (80TTB). Often missed — check your savings account interest income each year.
If your employer provides LTA, you can claim exemption for actual travel costs within India for yourself and family — twice in a block of 4 years (current block: 2022–2025). Economy air tickets or rail fares qualify. Must be actual travel with tickets as proof.
Interest paid on education loan (for higher studies) is fully deductible — no upper limit — for 8 consecutive years from the year you start repaying. This applies to loans for yourself, spouse, children, or a student for whom you are a legal guardian.
Up to ₹26,400 per year (₹2,200/month × 12) in food coupons/meal allowance is exempt from tax. If your employer provides this benefit, it reduces your taxable salary. Often overlooked in the rush of bigger deductions.
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