Tax Planning Tips for Salaried Employees – 2025

For most salaried individuals, tax season brings the same question every year – How can I legally save more tax? The good news is that the Indian Income Tax Act offers several deductions, exemptions, and planning opportunities to help you minimize your tax liability. In 2025, with the option to choose between the Old Tax Regime and the New Tax Regime, it’s more important than ever to make informed decisions.

In this blog, we’ll cover the best tax planning tips for salaried employees in 2025 so you can save more and stay compliant.

1. Choose Between Old and New Tax Regime Wisely

From FY 2023-24 onwards, the new tax regime is the default option, but salaried employees can still switch to the old regime every year.

Old Regime: Higher deductions and exemptions (HRA, 80C, 80D, etc.)
New Regime: Lower tax rates but minimal deductions allowed

👉 Tip: If you claim deductions of more than ₹3-3.5 lakh annually (HRA + 80C + 80D + others), the old regime is usually more beneficial. Otherwise, choose the new regime.

2. Maximize Section 80C Deductions

Under the old regime, you can claim up to ₹1.5 lakh under Section 80C. Some popular investments and expenses include:

Employee Provident Fund (EPF)
Public Provident Fund (PPF)
Equity Linked Savings Scheme (ELSS)
Life Insurance Premiums
Tuition Fees for Children
Home Loan Principal Repayment

3. Claim HRA (House Rent Allowance)

If you live in a rented house and receive HRA as part of your salary, you can claim a tax exemption.

Keep rent receipts and landlord’s PAN (if rent > ₹1 lakh per annum)
If you don’t receive HRA but live in rented accommodation, use Section 80GG to claim a deduction (subject to conditions).

4. Use Section 80D for Health Insurance

Premiums paid for health insurance policies are eligible for deductions:

₹25,000 for self, spouse, and children
Additional ₹25,000 for parents (₹50,000 if parents are senior citizens)

This not only reduces tax but also provides financial security in medical emergencies.

5. Claim Home Loan Interest under Section 24(b)

If you have a home loan, you can claim up to ₹2 lakh deduction on interest paid every financial year under Section 24(b). First-time homebuyers may also be eligible for an additional deduction under Section 80EE or 80EEA.

6. Use NPS for Additional Deduction (Section 80CCD(1B))

Contribute to the National Pension System (NPS) and claim an additional ₹50,000 deduction over and above the 80C limit. This is a great way to build a retirement corpus while saving tax.

7. Take Advantage of LTA (Leave Travel Allowance)

LTA allows you to claim tax exemption for travel expenses within India when you travel with family.

Can be claimed twice in a block of four years
Keep travel bills and tickets as proof

8. Invest in Tax-Saving Fixed Deposits or ELSS

If you are risk-averse, tax-saving FDs (with a 5-year lock-in) can be a safe option.
If you want higher returns and market-linked growth, ELSS mutual funds are an excellent choice with the shortest lock-in period (3 years) among all 80C options.

9. Utilize Reimbursements and Perquisites

Many employers provide tax-friendly allowances such as:

Food Coupons / Sodexo
Telephone / Internet Reimbursement
Uniform Allowance
Books & Periodicals Allowance

These can reduce your taxable salary if claimed properly.

10. File ITR on Time and Avoid Penalties

Tax planning doesn’t end with saving tax – you must also file your Income Tax Return (ITR) before the due date to avoid interest, late fees, and notices from the Income Tax Department.

Final Thoughts

Tax planning is not just about saving money – it’s about making smart financial decisions. By using deductions under Section 80C, 80D, 24(b), and NPS, and by choosing the right tax regime, salaried employees can significantly reduce their tax liability for FY 2025-26.

Start early, keep proper documentation, and consult a tax expert if needed to optimize your tax outgo.