Income Tax Season: With high income comes high tax liability. People love to earn a high income, but as it rises, they find it difficult to save tax, irrespective of the tax regime they are following. The new tax regime for the financial year 2025-26 provides a tax-free income up to Rs 12 lakh, while an income up to Rs 5 lakh is tax-free in the old tax regime.
Salaried-class individuals get an extra tax benefit of Rs 75,000 in the new tax regime and Rs 50,000 in the new old regime.
Do you earn Rs 10 lakh, Rs 15 lakh, or Rs 20 lakh and want to save tax in the old and new tax regimes?
Here are 4 ways in each regime that can help you save lakhs of rupees a financial year.
New tax regime
NPS tax benefit
Under Section 80CCD(2), an employee can get a tax benefit up to 14 per cent of their basic pay and dearness allowance (DA) on the employer’s National Pension System (NPS) contribution.
If you have an annual salary of Rs 16 lakh, where your basic salary is Rs 8 lakh, you can get a tax benefit of up to Rs 1,12,000 in a financial year.
EPF tax benefit
An employee can get tax benefit up to 12 per cent of their basic pay and dearness allowance (DA) on their employer’s Employees’ Provident Fund (EPF) contribution.
If you have an annual salary of Rs 16 lakh, where your basic salary is Rs 8 lakh, you can get a tax benefit of up to Rs 96,000.
Let-out property
Under Section 24, home buyers can claim tax benefits on the interest paid on a loan they have taken against a property they have let out. If the interest paid is higher than the rent for the same property, they can offset their losses against the rent.
Transport allowance/conveyance allowance
Taxpayers can claim a deduction on a number of work-related allowances they take as part of their salary. These allowances can be transport, entertainment, stationery/books and periodicals, uniform, etc. However, the tax benefit is available when the taxpayer has already paid tax on these allowances.
4 tax benefits in old tax regime
Section 80C
Section 80C of the Income Tax Act, 1961, provides a number of tax benefits on investment in investment schemes such as National Pension System, Employees’ Provident Fund (EPF), Public Provident Fund (PPF), Equity Linked Savings Scheme (ELSS) and a number of other scheme with at least a 5-year lock-in period.
Home loan borrowers can also get the tax benefit under the same section on the principal paid on a home loan. Life insurance premiums and the tuition fee paid also provide tax benefits under the same section. However, the total tax benefit under this section can’t be more than Rs 1.50 lakh.
Interest paid on home loan
Under Section 24, a first-time home loan borrowers can get a tax benefit up to Rs 2 lakh on the interest paid in a financial year.
Tax benefit on HRA
Employees having house rent allowance (HRA) as part of their salary can claim tax benefit under Section 10 (13A). The calculation of HRA tax benefit is the least of the 3 amounts- actual rent paid-10 per cent of salary, HRA from employer, and the city-specific limit.
Medical insurance premium tax deduction
Under Section 80D, an individual taxpayer can take a tax benefit of up to Rs 1,00,000 a financial year on the premium paid on a health insurance policies. They can claim tax benefits under 4 types of insurance premiums paid.
1. Up to Rs 25,000 for the premium paid for self, spouse and children
2. Up to Rs 50,000 (Rs 25,000+Rs 25,000) for the premium paid for self, spouse and children plus parents below 60 years of age.
3. Up to Rs 75,000 (Rs 25,000+Rs 50,000) for the premium paid for self, spouse and children plus parents above 60 years of age.
4. Up to Rs 1,00,000 (Rs 50,000+Rs 50,000) for the premium paid for self and spouse (eldest member 60 years of age or above) and parents (eldest parent 60 years of age or above).
(Disclaimer: This is not financial advice. Do your own due diligene or consult an expert for tax planning.)
