15 legal, proven tax-saving strategies for salaried employees. Updated for FY 2026-27 with new tax regime analysis.
For salaried employees in India, income tax can take up a significant chunk of your CTC — anywhere from 5% to 30% depending on your income bracket. The good news: the Indian tax code offers many legal avenues to reduce your tax liability. Here are the 15 most effective strategies for FY 2026-27.
Invest in PPF, ELSS, EPF, LIC premium, 5-year FD, NSC, or pay tuition fees. Each reduces taxable income by the amount invested.
Limit: ₹1,50,000/yearInvest in National Pension System (NPS) for an additional ₹50,000 deduction over and above the 80C limit. Reduces taxable income significantly.
Limit: ₹50,000/year (extra)Premium paid for health insurance for self, spouse, children and parents. Deduction up to ₹25,000 for self/family + ₹25,000–₹50,000 for parents (based on age).
Limit: ₹25,000–₹75,000If you pay rent and receive HRA, claim the exemption — minimum of actual HRA received, rent paid minus 10% of basic, or 40–50% of basic salary.
As per HRA formulaDeduct up to ₹2 Lakhs annually on interest paid on a home loan for a self-occupied property. For a let-out property, there's no upper limit on interest deduction.
Limit: ₹2,00,000/yearPrincipal repayment on home loan qualifies under Section 80C. Combined with other 80C investments, total deduction is capped at ₹1.5 Lakhs.
Part of ₹1,50,000 80C capAll salaried employees get a flat ₹50,000 standard deduction (old regime) or ₹75,000 (new regime) from salary income. No proof required.
₹50,000 (old) / ₹75,000 (new)Claim LTA exemption for domestic travel expenses (train/air) for self and family, twice in a block of 4 years. Only economy class airfare or AC1 train fare is exempt.
As per actual fare paid₹100/month per child (max 2 children) for tuition fees paid to educational institutions. Additional ₹300/month hostel allowance per child.
₹2,400/year per childFull interest paid on education loans for self, spouse, or children is deductible for up to 8 years. No upper cap on the deduction amount.
No upper limit, 8 yearsYour employer can contribute up to 14% of your basic salary to NPS. This is fully deductible for the employer and exempt for the employee — available under both regimes.
14% of basic (govt), 10% (private)Contribute more than the mandatory 12% to EPF through VPF. The entire contribution and returns are tax-free. Available under both regimes as employer PF is excluded from taxable income.
No upper cap on contributionMeal vouchers/coupons up to ₹50/meal (₹26,400/year for 2 meals/day) are tax-exempt. Ask your employer to restructure salary to include these.
₹26,400/yearActual telephone and internet bills paid for official use are fully exempt from tax when reimbursed by the employer. Keep bills for substantiation.
Actual bills (official use)For most employees with CTC below ₹12–15 LPA and limited deductions, the new regime gives a higher in-hand salary due to lower slab rates. Re-evaluate every year during investment declaration season.
Default from FY 2024-25| Deduction | Max Amount | Tax Saved (30% bracket) | Tax Saved (20% bracket) |
|---|---|---|---|
| Section 80C | ₹1,50,000 | ₹46,800 | ₹31,200 |
| NPS 80CCD(1B) | ₹50,000 | ₹15,600 | ₹10,400 |
| Health Insurance 80D | ₹75,000 | ₹23,400 | ₹15,600 |
| Home Loan Interest | ₹2,00,000 | ₹62,400 | ₹41,600 |
| HRA Exemption | Varies | Up to ₹60,000+ | Up to ₹40,000+ |
| Total Potential Saving | ₹4.75 Lakhs+ | ₹1,48,200 | ₹98,800 |
Tax saving amounts include 4% Health & Education Cess.
Tools to plan your tax savings
Compare old vs new regime and find which saves you more tax.
FY 2026-27Calculate exact take-home after all deductions.
MOST USEDSee your EPF corpus growth and monthly deduction.
FREECalculate your tax-exempt HRA amount.
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