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💡 Key Takeaway
A salaried professional in the 30% tax slab can save ₹1,25,000–₹2,00,000 per year through legitimate tax deductions. Most people claim less than half of what they're entitled to — simply because they don't know all the sections.
Income tax in India can feel like a maze — 80C, 80CCD, HRA, 24(b), new regime, old regime. But for salaried professionals, the system is actually straightforward once you map out the sections that apply to you. This guide covers every legitimate tax-saving option available in FY 2026-27, in order of impact.
Step 1: Choose the Right Tax Regime First
Before any deduction planning, you need to decide: new tax regime or old tax regime? This is the most important decision because all 80C, HRA, and home loan deductions only work under the old regime.
| Income Slab | New Regime | Old Regime |
|---|---|---|
| Up to ₹4,00,000 | 0% | 0% |
| ₹4L – ₹8,00,000 | 5% | 5% |
| ₹8L – ₹12,00,000 | 10% | 20% |
| ₹12L – ₹16,00,000 | 15% | 30% |
| ₹16L – ₹20,00,000 | 20% | 30% |
| ₹20L – ₹24,00,000 | 25% | 30% |
| Above ₹24,00,000 | 30% | 30% |
New regime: ₹75,000 standard deduction. Zero tax up to ₹12L income (87A rebate). Old regime: all deductions apply but higher slab rates.
Rule of thumb: If your total deductions (80C + NPS + HRA + home loan interest + 80D) exceed ~₹3.75 lakh, the old regime saves more. Below that, the new regime is generally better. Use the calculator below to find your exact answer.
🧾 Free Calculator
Tax Calculator FY 2026-27 — New vs Old Regime
Enter your salary and deductions — get exact tax under both regimes and see which saves you more.
Section 80C: ₹1.5 Lakh Deduction — Best Options Ranked
Section 80C is the most popular tax-saving section — it allows up to ₹1,50,000 deduction per year across a range of instruments. Here's how to choose within the ₹1.5L cap:
ELSS Mutual Funds
12–15% CAGR (historical)Lock-in: 3 yearsHighest returns among all 80C options. Market-linked equity growth. Shortest lock-in.
EPF (Employee Contribution)
8.25% p.a.Lock-in: Till retirementMandatory for salaried — automatic 80C benefit. EEE status. Employer matches 12%.
PPF
7.1% p.a.Lock-in: 15 yearsGuaranteed, EEE tax-free. Best for safe debt component in portfolio.
Home Loan Principal
Saves 8.5–9% interestLock-in: Loan tenureRepayment of home loan principal counts in 80C — dual benefit with Section 24(b) for interest.
Term Insurance Premium
Protection, not returnLock-in: Policy termMust-have anyway — 80C benefit is a bonus. Only for pure term plans, not ULIPs.
Practical allocation within ₹1.5L: If your EPF already covers ₹60,000–90,000 of the 80C limit (12% of Basic × 12), invest the remainder in ELSS SIP. If your employer doesn't deduct EPF, max ELSS first, then PPF for the balance.
Section 80CCD(1B): The ₹50,000 NPS Deduction Most Salaried Indians Miss
This is the single most underutilised tax-saving section in India. Section 80CCD(1B) gives you an additional ₹50,000 deduction per year for NPS contributions — completely over and above the ₹1.5L 80C limit.
What ₹50,000 in 80CCD(1B) saves you
20% slab
₹10,400
₹50K × 20% + 4% cess
30% slab
₹15,600
₹50K × 30% + 4% cess
30% + surcharge
₹17,000+
Income above ₹50L
Over 25 working years: ₹15,600 × 25 = ₹3.9 lakh saved in tax from 80CCD(1B) alone — not counting the NPS corpus it builds.
To claim this: open an NPS Tier 1 account (takes 15 minutes on eNPS portal), invest ₹50,000 per financial year (can be in one lump sum in March or monthly ₹4,167 SIP), and declare it in your employer's IT declaration or ITR.
🏢 Free Calculator
NPS Calculator — 80CCD(1B) + Corpus + Pension
Calculate your exact NPS corpus, monthly pension at retirement, and total tax saved across all three NPS sections.
HRA Exemption: Tax-Free Rent Allowance
If you receive HRA as part of your salary and live in a rented house, you can claim HRA exemption under the old tax regime. This is often worth ₹1–2 lakh per year for metro-city employees.
HRA Exemption = Minimum of these 3
Actual HRA received from employer
From your salary slip
Actual rent paid − 10% of Basic salary
E.g. ₹25K rent − (10% × ₹50K basic) = ₹20K/mo
50% of Basic (metro) or 40% (non-metro)
Delhi, Mumbai, Chennai, Kolkata = metro
Conditions: Must be paying actual rent to a landlord (not parents in the same house). Rent receipts required. Landlord PAN mandatory if annual rent > ₹1 lakh.
Home Loan Tax Benefits: Section 24(b) + 80C
If you have a home loan, you get two separate tax benefits — one for the interest paid and one for the principal repaid:
Section 24(b)
₹2,00,000/year
Interest paid on home loan
Old regime onlyFor self-occupied property. No limit for let-out property.
Section 80C
Within ₹1,50,000 cap
Principal repaid on home loan
Old regime onlyCounted within the same ₹1.5L 80C limit alongside ELSS/PPF.
Combined, a home loan borrower with ₹2L interest + ₹50K principal can claim ₹2.5L deduction annually — saving ₹75,000+ in tax at the 30% slab. Use the EMI Calculator to see prepayment vs investment scenarios.
Section 80D: Health Insurance Premium Deduction
Health insurance premiums qualify for deduction under Section 80D, separate from 80C:
| Who Is Covered | Max Deduction |
|---|---|
| Self + spouse + children (below 60) | ₹25,000 |
| Self + spouse + children (self is senior citizen) | ₹50,000 |
| Parents (below 60) | Additional ₹25,000 |
| Parents (senior citizens, 60+) | Additional ₹50,000 |
| Maximum possible (self senior + senior parents) | ₹1,00,000 |
Complete Tax Saving Summary: All Sections
| Section | What | Max Deduction | Regime |
|---|---|---|---|
| Standard Deduction | Auto for all salaried | ₹75,000 | Both |
| 80C | ELSS / EPF / PPF / LIC / Home Principal | ₹1,50,000 | Old only |
| 80CCD(1B) | NPS Tier 1 — extra beyond 80C | ₹50,000 | Old only |
| 80CCD(2) | Employer NPS contribution | Up to 14% salary | Both ✅ |
| 24(b) | Home loan interest | ₹2,00,000 | Old only |
| 80D | Health insurance premiums | ₹25,000–₹1,00,000 | Old only |
| HRA | Rent allowance exemption | Varies (formula) | Old only |
| LTA | Leave travel allowance | ₹ varies | Old only |
| Maximum possible deduction (old regime, home loan, senior parents) | ₹5,75,000+ | Old regime | |
At the 30% slab, ₹5.75L deduction saves approximately ₹1,79,400 in income tax (₹5,75,000 × 30% + 4% cess). This is the difference between paying ₹3.5L in tax versus paying ₹1.7L — purely from planning.
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See Your Exact Tax Saving — Free Calculator
Enter salary, HRA, deductions. Get exact tax under old and new regime in seconds. Free Excel download.
Frequently Asked Questions
What is the maximum tax I can save under 80C in India?▾
Under Section 80C, you can claim a maximum deduction of ₹1,50,000 per year. Eligible instruments include ELSS mutual funds, PPF contributions, EPF (employee share), life insurance premiums, 5-year tax-saving FD, NSC, home loan principal repayment, and children's tuition fees. To maximise savings, ELSS is the best option within 80C — it offers equity market returns (historically 12–15% CAGR) with the shortest lock-in of 3 years.
What is the extra ₹50,000 NPS deduction under 80CCD(1B)?▾
Section 80CCD(1B) allows an additional deduction of ₹50,000 per year for NPS Tier 1 contributions — completely separate from and over and above the ₹1.5L limit under 80C. At the 30% tax slab, this saves an extra ₹15,600 annually (₹50,000 × 30% + 4% cess). This ₹50,000 deduction is exclusive to NPS — no other investment qualifies for 80CCD(1B). This is the single most underused tax saving available to salaried Indians.
Should I choose the new or old tax regime in FY 2026-27?▾
After Budget 2025: New regime offers zero tax up to ₹12L income (with 87A rebate) and ₹75K standard deduction, but removes most deductions. Old regime allows 80C (₹1.5L), 80CCD(1B) NPS ₹50K, HRA, home loan interest (₹2L), and other deductions. If your total deductions (80C + NPS + HRA + home loan interest) exceed approximately ₹3.75L, the old regime typically saves more. Use ProfitNifty's Tax Calculator to find your exact break-even.
Can I claim both 80C and 80CCD(1B) deductions together?▾
Yes — and this is exactly what you should do for maximum tax saving. 80C gives you ₹1.5L deduction for ELSS/PPF/EPF etc. 80CCD(1B) gives you an additional ₹50,000 for NPS, completely separate. Together, you get ₹2L deduction before counting HRA, home loan interest, or 80D health insurance. A 30% slab taxpayer claiming both saves ₹52,000+ in income tax per year from just these two sections.
What is HRA exemption and how is it calculated?▾
HRA (House Rent Allowance) exemption is available under the old tax regime. The exemption is the minimum of: (1) Actual HRA received from employer, (2) Actual rent paid minus 10% of basic salary, (3) 50% of basic salary (for metro cities: Delhi, Mumbai, Chennai, Kolkata) or 40% (for non-metro). To claim HRA, you need rent receipts and the landlord's PAN (if annual rent exceeds ₹1L). You cannot claim HRA exemption if you live in your own house.
Is term insurance premium tax deductible in India?▾
Yes — term insurance premiums paid for self, spouse, and children qualify for deduction under Section 80C (within the ₹1.5L limit). Health insurance premiums qualify under Section 80D: ₹25,000 for self + family, additional ₹25,000 for parents (₹50,000 if parents are senior citizens). Note: Only pure term plans are cost-efficient for this purpose. ULIPs and endowment plans are expensive insurance-investment combos with poor returns on both counts.
What are the best tax saving investments for 30% slab taxpayers?▾
For the 30% tax bracket, priority order: (1) NPS 80CCD(1B) ₹50K — saves ₹15,600 extra, unique to NPS. (2) ELSS SIP within 80C — 12–15% CAGR, 3-year lock-in. (3) Employer NPS via 80CCD(2) — ask HR to restructure salary. (4) PPF for safe debt allocation within 80C. (5) Home loan interest under 24(b) — ₹2L deduction. (6) Health insurance 80D. Total potential deduction can exceed ₹4L+, saving over ₹1.25L in tax annually.
Does ELSS qualify for 80C deduction in the new tax regime?▾
No. Under the new tax regime (Budget 2025), Section 80C deductions — including ELSS, PPF, and LIC premiums — are not available. The new regime offers lower slab rates but removes most deductions. However, NPS employer contribution under Section 80CCD(2) remains available even in the new regime, making it the only significant deduction left. If you choose the new regime, restructure your salary to maximise employer NPS contribution.
ProfitNifty Editorial
Updated March 2026 · FY 2026-27 tax rules · India-specific content for salaried professionals
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⚠️ Disclaimer: This article is for educational purposes only. Tax rules are based on Finance Act 2025 / Budget 2026 proposals for FY 2026-27 and may be subject to amendment. Consult a CA or tax professional for personalised advice. ProfitNifty is not a SEBI-registered advisor. profitnifty.in
SAI KUMAR DIVVELA
Founder, ProfitNifty | Currently working as a Pre-Sales Consultant in reputed IT Organisation
PGDBA+MBA (MIT) · B-Tech (KLU) · 14+ Years Experience
Personal finance writer with 14 years experience in IT pre-sales and 10+ years in Stock Market, financial planning. My vision is to share knowledge for salaried Indians to save tax, invest smarter, and build wealth.