How to save income tax on salary in 2026 — every legal trick

The new tax regime is simpler — ₹12.75L tax-free for salaried, no headaches. But the old regime can save you significantly more if you stack deductions correctly. Here's every legal tax-saving trick for FY 2026-27.

Step 0: Pick the right regime

• Total deductions < ₹4 lakh: New regime wins almost always
• Total deductions ≥ ₹4 lakh: Old regime usually wins

Use our income tax calculator to compare both side-by-side at your exact income.

Old regime — the deduction stack

1. Section 80C — ₹1.5 lakh

• EPF (auto from salary, ~₹50–80K typically)
• PPF: 7.1% tax-free
• ELSS: equity, 3-year lock
• Sukanya Samriddhi: 8.2% if you have a girl child
• Home loan principal repaid
• Children's tuition fees (up to 2 kids)
• Term insurance premium

Save ₹45,000 tax at 30% slab. Use our planner to allocate optimally.

2. Section 80CCD(1B) — extra ₹50K NPS

This is on TOP of 80C. Open NPS Tier 1, contribute ₹50,000/year. Save ₹15,000 tax. No other instrument gives this extra deduction.

3. Section 80D — health insurance

• Self + family: ₹25,000
• Senior parents: ₹50,000 (if either parent is 60+)
• Combined max: ₹75,000
• Preventive health check-up: ₹5,000 within the above limits

Don't have health insurance? Get a ₹10–25L family floater for ₹15–30K premium. Tax saving + actual protection.

4. HRA exemption — Section 10(13A)

Lowest of:

• Actual HRA received
• 50% of basic (metro) / 40% (non-metro)
• Rent paid − 10% of basic

The optimiser trick: pay rent ≥ HRA + 10% of basic. Below that, you leave exemption on table. Use our HRA optimizer.

5. Section 24(b) — home loan interest

Up to ₹2 lakh deductible on self-occupied property home loan interest. Save ₹60,000 tax at 30% slab.

Both spouses with home loan → both can claim ₹2L each = ₹4L total deduction.

6. Standard deduction — ₹50,000

Auto-applied to salaried in old regime (₹75K in new regime).

7. Section 80E — education loan interest

No upper cap! Full interest deductible for 8 years from when repayment starts. For self / spouse / children's higher studies.

8. Section 80G — donations

50% or 100% deduction depending on the cause/charity. PM CARES, Swachh Bharat = 100%. Most NGOs = 50%.

9. LTA — Leave Travel Allowance

Tax-exempt for 2 trips in a 4-year block (current block: 2022-2025). Need actual travel + tickets within India.

10. Food coupons / FBP

Up to ₹50/meal × 22 days = ₹1,100/month tax-free. Old regime only.

The full stack — example

Salary ₹20L, age 32, has a girl child, paying ₹35K rent in Mumbai.

Deduction	Amount
Standard deduction	₹50,000
EPF (12% basic)	₹96,000
Sukanya Samriddhi (max in 80C)	₹54,000
NPS Tier 1 (80CCD(1B))	₹50,000
Health insurance (self + parents)	₹50,000
HRA exemption	₹2,40,000
Home loan interest	₹2,00,000
Total deductions	₹7,40,000

• Taxable income: ₹20L − ₹7.4L = ₹12.6L
• Old regime tax: ₹1.78L + 4% cess = ₹1.85L
• New regime tax (no deductions, only ₹75K std): taxable ₹19.25L → tax ₹2.62L + 4% cess = ₹2.72L
• Old regime saves ₹87,000 in this case

New regime — yes, you can still save tax

Even in new regime, some deductions remain:

• Standard deduction: ₹75,000 (vs ₹50K in old)
• Employer NPS contribution u/s 80CCD(2): up to 14% of basic — separate from any cap
• Rebate u/s 87A: makes ₹12L taxable → zero tax → effectively ₹12.75L gross tax-free for salaried

Negotiate with employer to add NPS contribution (~10% of basic) to your CTC structure — saves significant tax in new regime without affecting take-home much.

Common tax-saving mistakes

• Buying ULIP for tax saving (charges erode returns more than tax saved)
• Investing in tax-saver FD (taxable interest, low return — last resort only)
• Not claiming HRA when staying with family (you can pay rent to parents legally)
• Forgetting LTA in your CTC negotiation
• Not optimising regime annually (your situation changes — re-evaluate every year)

FAQs

Can I claim HRA if I live with parents?

Yes — pay rent via bank transfer, get rent receipts, ensure parents declare it as income. Reasonable rent for the area only.

Best 80C investment for highest return?

ELSS for long-term (12% historical) > Sukanya Samriddhi if girl child (8.2% tax-free) > PPF (7.1% tax-free) > others.

Do I need to submit proofs?

To employer for TDS calculation: yes, by Jan-Feb each year. To IT Dept while filing: not unless asked, but keep for 6 years.

Should I switch from old to new regime?

If your deductions dropped (kids done, home loan paid off, etc.), yes. Salaried can switch every year; business income can switch only once back to new.