Tax planning is essential at the start of the financial year. Whether you are a salaried employee, self-employed professional, or business owner, being aware of tax-saving opportunities can make a significant difference in your annual tax liability. Here’s a look at some of the most effective tax-saving strategies available in FY 2025-26.
1️⃣ Understand Your Tax Regime: Old vs New
The Budget 2025 has retained the new tax regime with lower tax slabs. However, the new scheme doesn’t allow most exemptions and deductions, making it simpler but less flexible for tax savings. Here’s a quick comparison:
- Old Tax Regime: Allows deductions such as 80C (for investments), 80D (health insurance), HRA (House Rent Allowance), etc.
- New Tax Regime: Offers lower tax rates, but doesn’t allow exemptions/deductions, which may be beneficial for people without significant deductions to claim.
Tip: Calculate your taxes under both regimes to choose the one that provides the most tax savings.
2️⃣ Utilize Section 80C Deductions to the Fullest
Under the old tax regime, one of the best ways to reduce your taxable income is by making investments that qualify for Section 80C deductions. The maximum you can claim under 80C is ₹1.5 lakh.
Common 80C Investments:
- Public Provident Fund (PPF)
- National Savings Certificates (NSC)
- Employee Provident Fund (EPF)
- Tax-Saving Fixed Deposits
- Life Insurance Premiums
- ELSS Mutual Funds (Equity-Linked Savings Schemes)
Tip: If you are close to reaching the ₹1.5 lakh limit, consider increasing your PPF or ELSS contributions to reduce your taxable income.
3️⃣ Health Insurance (Section 80D)
You can claim deductions on premiums paid for health insurance under Section 80D. This includes premiums for your own, spouse, children, and even your parents.
- Maximum Deduction:
- ₹25,000 for self, spouse, and children.
- ₹50,000 if you or your parents are senior citizens (aged 60 years or above).
Tip: Ensure to pay premiums for parents as well, especially if they are senior citizens, as it can give you an additional deduction under 80D.
4️⃣ National Pension Scheme (NPS) Contributions
The National Pension Scheme (NPS) provides a deduction of ₹50,000 under Section 80CCD(1B), which is over and above the 80C limit. This means you can save an additional ₹50,000 by contributing to your NPS account.
Tip: Opt for NPS if you are looking for a retirement savings option with tax-saving benefits. It’s an excellent way to save taxes and build your pension corpus.
5️⃣ Save Taxes with HRA (House Rent Allowance)
If you are paying rent for a house, you can claim House Rent Allowance (HRA) under the old tax regime. The amount you can claim as HRA depends on various factors such as:
- Your salary
- Rent paid
- The city you live in
- The HRA component in your salary
Tip: Make sure your rent receipts are up-to-date and reflect the rent you are actually paying.
6️⃣ Use the Standard Deduction for Salaried Individuals
The standard deduction of ₹50,000 is available to salaried employees and pensioners, irrespective of the tax regime you choose. This deduction directly reduces your taxable income.
Tip: Ensure you take full advantage of the standard deduction when filing your ITR.
7️⃣ Claim Tax Benefits on Home Loan (Section 24 and 80C)
If you have a home loan, you can claim tax deductions on both the principal repayment and interest paid:
- Principal Repayment: Under Section 80C (up to ₹1.5 lakh).
- Interest on Home Loan: Under Section 24(b) (up to ₹2 lakh).
Tip: If you have a home loan, ensure that you claim both deductions for the maximum tax benefit.
8️⃣ Invest in Tax-Saving Fixed Deposits
Tax-saving Fixed Deposits (FDs) have a lock-in period of 5 years and offer tax deductions under Section 80C. They are a safe investment option with guaranteed returns.
Tip: Tax-saving FDs are ideal if you're looking for a low-risk option to reduce taxes under Section 80C.
9️⃣ Offset Your Capital Gains
Capital gains are subject to tax, but there are ways to offset them by investing in exemptions such as:
- Section 54: For long-term capital gains (LTCG) from the sale of property, you can reinvest the gains in another property to avoid taxes.
- Section 54EC: For gains from the sale of long-term assets like property, you can invest in bonds issued by the National Highways Authority of India (NHAI) or Rural Electrification Corporation (REC) to save taxes.
Tip: Plan your investments wisely if you have any capital gains to ensure you can offset them with eligible exemptions.
10️⃣ Be Mindful of Tax-Loss Harvesting
If you have made investments in stocks, bonds, or mutual funds, consider tax-loss harvesting—selling losing investments to offset any capital gains.
Tip: Consult with a financial advisor to make sure you are using tax-loss harvesting effectively, especially if you have made significant capital gains from equity or other assets.
Conclusion
Tax planning in FY 2025-26 doesn’t have to be complicated. Whether you choose the old tax regime or new tax regime, there are still plenty of opportunities to save on taxes. From 80C deductions to NPS contributions and HRA claims, smart tax planning can help you maximize your savings and minimize your tax liability.
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