Tax Saving Tips for 2025-26

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Tax Saving Tips for 2025-26 – Legally Save More Tax

Paying taxes is important, but paying more tax than you need to is not smart. With the latest updates in Budget 2025, there are many ways to reduce your tax liability legally while staying compliant with the Income Tax Act.

In this guide, we’ll explore top tax-saving tips for FY 2025-26 (AY 2026-27) that salaried employees, business owners, and professionals can use to optimize their taxes.

1. Choose the Right Tax Regime

The first step is to decide between the Old Tax Regime (with deductions) and the New Tax Regime (lower slab rates).

  • If your deductions are less than ₹3-3.5 lakh, the New Regime is usually better (zero tax up to ₹12 lakh after rebate).

  • If you have home loan interest, HRA, 80C investments, 80D medical insurance, and other deductions exceeding ₹3.5 lakh, stick with the Old Regime.

2. Maximize Section 80C Deductions

Under the Old Regime, you can claim up to ₹1.5 lakh under Section 80C. Eligible investments include:

  • ELSS Mutual Funds (3-year lock-in, tax-efficient)

  • Employee Provident Fund (EPF) / Public Provident Fund (PPF)

  • Life Insurance Premiums

  • Tax-Saving Fixed Deposits (5-year lock-in)

  • Home Loan Principal Repayment

3. Claim Home Loan Benefits

Homeowners can save significantly through:

  • Section 24(b): Up to ₹2 lakh deduction on home loan interest (self-occupied property)

  • Section 80C: Principal repayment included in ₹1.5 lakh limit

  • Stamp Duty & Registration Charges: Deduction in the year of purchase

Tip: If you have a second home, you can claim interest without any upper limit if it is rented out (subject to set-off limit of ₹2 lakh).

4. Get Health Insurance and Save Tax

Medical insurance premiums qualify for Section 80D deduction:

Category Deduction Limit
Self + Family (age < 60) ₹25,000
Parents (< 60) ₹25,000
Parents (≥ 60) ₹50,000

This means you can claim up to ₹1,00,000 if you and your parents are senior citizens.

5. Use NPS for Extra Deduction

Contribute to National Pension System (NPS) to get:

  • ₹50,000 extra deduction under Section 80CCD(1B) (over and above 80C limit)

  • Tax benefits on employer’s contribution under Section 80CCD(2)

This is one of the best ways to save additional tax beyond the usual 80C cap.

6. Invest in Tax-Free Allowances (For Salaried Employees)

Take full advantage of:

  • HRA (House Rent Allowance) if you live in rented accommodation

  • LTA (Leave Travel Allowance) – claim for 2 journeys in 4 years

  • Food Coupons / Meal Vouchers – tax-free up to ₹50 per meal

7. Optimize Capital Gains

  • Hold equity investments for 12 months to benefit from 10% LTCG rate (above ₹1 lakh gains).

  • Book profits smartly across financial years to stay below taxable limits.

  • Reinvest under Section 54/54EC (for property sales) to save LTCG tax.

8. Donate and Save Tax

Eligible donations can be claimed under Section 80G.

  • 100% deduction for donations to PMNRF, PM CARES Fund, etc.

  • 50% deduction for other approved charitable institutions

9. Claim Education Loan Deduction

Under Section 80E, you can claim full interest paid on education loan for up to 8 years – no limit on amount.

10. Plan Investments Early

Last-minute tax saving can lead to poor decisions. Plan early in the financial year:

  • Automate investments in ELSS/NPS

  • Spread payments to claim deductions smoothly

  • Avoid cash crunch at the year-end

11. Track TDS & Advance Tax Payments

  • Check Form 26AS / AIS regularly to ensure correct credit of TDS/TCS.

  • Pay advance tax in time to avoid interest under Sections 234B and 234C.

Conclusion

Tax planning in 2025-26 is all about choosing the right regime, claiming eligible deductions, and investing smartly. Whether you are a salaried employee or a business owner, you can legally save tax by using the available provisions in the Income Tax Act.

Start planning early, keep records of investments and expenses, and review your tax strategy every year for maximum benefit.

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