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Tax
How Salaried Individuals Can Save on Income Tax
How Salaried Individuals Can Save on Income Tax
Tax Slab for New Tax Regime
Tax Slab for Old Tax Regime (For individuals below 60 years)
There are some examples of deduction and exemption which can be considered while tax planning
Reimbursement and Perquisites
Strategy to be followed for Tax Planning
Disclaimer:
How Salaried Individuals Can Save on Income Tax
How Salaried Individuals Can Save on Income Tax
Tax Planning is an important aspect to save tax for salaried employees. It is a strategy used by the tax payers to minimize their tax liability by using various kinds of deductions, exemptions, allowances and rebates provided by Income Tax Act, 2025.
Tax planning aims to reduce the tax liability and increase tax savings through various legitimate tax savings options. Here are a few tax planning tips for salaried employees that can help you save on income tax, make your contribution to India's economy, and yet still build a strong future for yourself and your loved ones.
As per Income Tax Act, there are two tax regime i.e Old Tax Regime and New Tax regime. The tax slab structure and rates are different in both the regimes. The individual should analyze which regime should be selected so that they can reduce their tax liability.
Tax Slab for New Tax Regime
Tax Slab for New Tax Regime
| Income Tax Slabs | Income Tax Rates |
|---|---|
| Up to Rs 4 lakh | NIL |
| Rs 4 lakh - Rs 8 lakh | 5% |
| Rs 8 lakh - Rs 12 lakh | 10% |
| Rs 12 lakh - Rs 16 lakh | 15% |
| Rs 16 lakh - Rs 20 lakh | 20% |
| Rs 20 lakh - Rs 24 lakh | 25% |
| Above Rs 24 lakh | 30% |
Tax Slab for Old Tax Regime (For individuals below 60 years)
Tax Slab for Old Tax Regime (For individuals below 60 years)
| Income Tax Slabs | Income Tax Rates |
|---|---|
| Up to Rs 2.5 lakh | NIL |
| Rs 2.5 lakh to Rs 5 lakh | 5% |
| Rs 5 lakh to Rs 10 lakh | 20% |
| Above Rs 10 lakh | 30% |
There are some examples of deduction and exemption which can be considered while tax planning
There are some examples of deduction and exemption which can be considered while tax planning
| Head | Description | Maximum Benefit | Benefit Available in Old Tax Regime | Percentage of Deduction for AY 2024-2025 |
|---|---|---|---|---|
| Standard Deduction | A flat deduction from your gross salary. | Varies as per the regime | Rs. 50,000 | Rs. 75,000 |
| Deduction u/s 123 | Deductions for various investments and expenses. | ₹1.5 lakh | Yes | No |
| Deduction u/s 124(3) | Additional deduction for voluntary contributions to the National Pension System (NPS). | ₹50,000 (over and above sec 123 limit) | Yes | No |
| Deduction u/s 126 | Premiums paid for health insurance for self, family, and parents. | Up to ₹1 lakh (subject to conditions based on age) | Yes | No |
| Interest on Home Loan u/s 22(1)(b) | Interest paid on a home loan for a self-occupied property and let out property. | ₹2 lakh | Yes | No - except for Let out property |
| HRA Exemption under Schedule III, Table Sl. No. 11 | Exemption on House Rent Allowance if you live in rented accommodation. | Varies based on location and salary | Yes | No |
| LTA Exemption under Schedule III, Table Sl. No. 8 & Note 2 | Exemption for travel expenses on domestic trips (twice in a 4-year block). | Varies (actual travel cost) | Yes | No |
| Education Loan u/s 129 | Interest cost for 8 Years | Interest cost with no limit | Yes | No |
| Deduction u/s 124(1) & 124(2) | Employers’ contribution to NPS | Varies as per the regime | 10% of salary (Basic +DA) | 14% of salary (Basic +DA) |
Reimbursement and Perquisites
Reimbursement and Perquisites
Some allowances and perquisites offered by employers are tax-free or partially taxable, such as
- Meal Coupons and Food Allowances
- Telephone and internet reimbursements
- Uniform allowances
- Fuel reimbursements
Strategy to be followed for Tax Planning
Strategy to be followed for Tax Planning
1. Start Tax Planning early:
One of the crucial steps in tax saving is start its planning at start of year. Avoid last minute rush which may not be fruitful. Tax planning at start of year helps you to analyze your expense budget basis your Income and investment ratio. Also, it gives enough time to check different investment option basis your need and switch same basis your requirement.
2. Make Full Use of Section 123:
Section 123 consists of a long list of expenses and investments that are eligible for tax deductions, including Mediclaim. Under Section 123, a taxpayer can claim a maximum deduction of ₹1.5 lakhs from their total taxable income in a given fiscal year in which the investment/expenditure was made. Make sure you have complete knowledge about the terms and conditions to lower the tax payout from your salary legally. If taken advantage of properly, Section 123 can become the best option for tax saving for salaried individuals.
3. Focus on Investments, Not Tax Saving:
As a rule of thumb, do not take any steps only with the aim of saving tax. Instead, focus on making investments and choosing funds that can give you and your family member long-term benefits. A few examples of such investments are Life insurance, EPFs (Employee Provident Funds), children’s plans, mutual funds, ELSS (equity linked saving schemes) and ULIPs (Unit-Linked Insurance Plans). These not only serve as tax saving options for salaried individuals but also secure your financial future.
4. Consider Taking Home Loans:
Under Section 123 of the Income Tax Act, up to ₹1.5 lakhs can be exempted from tax deduction from the amount a homeowner repays towards their home loan. Under Section 22, one can also claim tax benefits on the interest paid on home loans.
5. Spread your Income Tax Rebate:
Do not invest this money in a single instrument. Instead, select different investment tools, such as PPFs (Public Provident Fund), insurance plans, mutual funds (tax paying), National Savings Certificates (NSCs), insurance plans, etc., to invest your money. Make sure you consider your income levels, financial goals, and risk appetite to choose an investment tool. This strategy is especially useful for tax planning of salaried employees. In addition, medical bills, rent receipts, conveyance bills, travel bills, education loans, health insurance premiums or Mediclaim receipts can also be used for income tax planning for salaried employees under Section 123. You can also take the help of a tax calculator to plan your investments and expenditure to reduce the amount of tax you need to pay. To get maximum benefit, make sure you start your tax planning as a salaried person when the fiscal year starts.
| Section as per Income Tax Act 1961 | Section as per Income Tax Act 2025 |
|---|---|
| 80C/80CCC/80CCD(1) | 123 |
| 80CCD(1B) | 124(3) |
| 80D | 126 |
| 24(b) | 22(1)(b) |
| 10(13A) | Schedule III (Table Sl. No. 11) |
| 10(5) | Schedule III (Table Sl. No. 8) |
| 80E | 129 |
| 80CCD(2) | 124(1) & 124(2) |
Disclaimer:
Disclaimer:
Our content given in this article is as per the existing provisions, laws and regulations as per the Income Tax Act, 2025 and Income Tax Rules, 2026 issued thereunder. Tax laws are subject to amendments made thereto from time to time. The benefits / guidance mentioned herewith should not be considered as opinion / view of the Company. We request to seek independent view from your personal tax advisor on applicable tax benefits / guidance under the said article.