🧾 Tax Planning for Salaried Employees in India – FY 2025–26

By CA Ankush Aggarwal

Tax planning for salaried employees is a strategic approach to reduce income tax liability while staying compliant with Indian tax laws. It involves evaluating income, expenses, and investments to structure finances in a tax-efficient manner. This guide outlines the best strategies for salaried individuals to save tax in FY 2025–26 (AY 2026–27).

📌 Step 1: Understand Income Tax Slabs – Old vs. New Regime

Choosing between the Old Tax Regime and the New Tax Regime under Section 115BAC is the first step in tax planning.

👉 New Tax Regime (FY 2025–26):

Income Slabs	Tax Rate
Up to ₹4,00,000	NIL
₹4,00,001 – ₹8,00,000	5%
₹8,00,001 – ₹12,00,000	10%
₹12,00,001 – ₹16,00,000	15%
₹16,00,001 – ₹20,00,000	20%
₹20,00,001 – ₹24,00,000	25%
Above ₹24,00,000	30%

👉 Old Tax Regime:

Income Slabs	Tax Rate
Up to ₹2,50,000	NIL
₹2,50,001 – ₹5,00,000	5%
₹5,00,001 – ₹10,00,000	20%
Above ₹10,00,000	30%

📌 Step 2: Maximize Deductions Under Section 80C

Under the old regime, you can claim a deduction of up to ₹1.5 lakh under Section 80C. Eligible investments/expenses include:

• Public Provident Fund (PPF)
• Employee Provident Fund (EPF)
• Equity-Linked Savings Scheme (ELSS)
• Life Insurance Premium (self, spouse, children)
• National Savings Certificate (NSC)
• Home loan principal repayment

📌 Step 3: Claim Health Insurance Deduction – Section 80D

Reduce your taxable income by paying health insurance premiums:

Insured	Deduction Limit
Self, spouse & children	Up to ₹25,000
Parents (<60 years)	Additional ₹25,000
Parents (≥60 years)	Additional ₹50,000
Preventive health check-up	Included up to ₹5,000

📌 Step 4: House Rent Allowance (HRA) – Section 10(13A)

If you live in rented accommodation and receive HRA, you can claim an exemption:

• Actual HRA received
• 50% of salary (metro cities) or 40% (non-metro)
• Rent paid minus 10% of salary

If you don’t receive HRA, claim under Section 80GG (least of ₹5,000/month, 25% of total income, or rent paid – 10% of income).

📌 Step 5: Deduction for Education Loan Interest – Section 80E

Interest on education loan (for self, spouse, or children) is fully deductible for up to 8 years.

📌 Step 6: Invest in NPS – Section 80CCD

• 80CCD(1): Up to ₹1.5 lakh (included in 80C limit)
• 80CCD(1B): Additional ₹50,000 (over 80C limit)
• 80CCD(2): Employer contribution – not part of 80C/1B limit

Employer Type	Old Regime	New Regime
Government	14% of salary	14% of salary
Private Sector	10% of salary	14% of salary

📌 Step 7: Standard Deduction for Salaried Individuals

• Old Regime: ₹50,000
• New Regime: ₹75,000 (from FY 2025–26 onward)

This deduction is auto-applied to all salaried and pensioned taxpayers.

📌 Step 8: Leave Travel Allowance (LTA)

LTA is tax-exempt for domestic travel – two journeys in a block of four years (e.g., 2022–2025):

• Airfare (economy class)
• Rail/bus fare (as applicable)

📌 Step 9: Reimbursements and Perquisites

Certain employer reimbursements are tax-exempt or partly taxable:

• Meal vouchers (e.g., Sodexo)
• Telephone/internet bills
• Uniform allowance
• Books & education expenses (if work-related)

📌 Step 10: File ITR Before Due Date

Filing your Income Tax Return (ITR) on time avoids penalties and ensures faster refunds.

✅ Final Thoughts

Whether you choose the Old or New Tax Regime, understanding available deductions, rebates, and exemptions helps in strategic tax planning. Stay ahead by planning early and filing accurately.