How Salaried Employees Can Save Tax in India
A salaried employee in India can legally reduce their taxable income by up to ₹3.5 lakh or more each year through a combination of deductions. Section 80C alone allows ₹1.5 lakh via EPF, ELSS, PPF, or life insurance, while an additional ₹50,000 is available under Section 80CCD(1B) for NPS contributions. Add HRA exemption, standard deduction of ₹50,000, and LTA claims, and most professionals can cut their tax bill significantly without taking undue risk.
Frequently asked questions
Quick answer
What is the best way to save tax on salary in India?
Start with Section 80C — max it out at ₹1.5 lakh using EPF contributions, PPF, or ELSS mutual funds. Then add ₹50,000 via NPS under 80CCD(1B) and claim health insurance premiums under 80D. Together these can reduce taxable income by over ₹2.5 lakh.
What is the best way to save tax on salary in India?
Start with Section 80C — max it out at ₹1.5 lakh using EPF contributions, PPF, or ELSS mutual funds. Then add ₹50,000 via NPS under 80CCD(1B) and claim health insurance premiums under 80D. Together these can reduce taxable income by over ₹2.5 lakh.
How does HRA exemption work for salaried employees?
HRA exemption is the lowest of: actual HRA received, 50% of basic salary (metro) or 40% (non-metro), and actual rent paid minus 10% of basic salary. Employees in Mumbai or Delhi paying high rent often get the maximum benefit — keep your rent receipts and landlord PAN if annual rent exceeds ₹1 lakh.
Should I choose the old tax regime or new tax regime?
The new regime has lower slab rates but removes most deductions including 80C, HRA, and 80D. If your total eligible deductions exceed roughly ₹3.75 lakh (including standard deduction), the old regime usually saves more tax. Use a tax comparison calculator or ask your employer's payroll team to run both scenarios.
How can I save tax beyond 80C if I've already invested ₹1.5 lakh?
Beyond 80C, you can claim ₹50,000 extra via NPS (80CCD1B), health insurance premiums up to ₹25,000 for yourself and ₹50,000 for senior citizen parents under 80D, and home loan interest up to ₹2 lakh under Section 24. LTA (Leave Travel Allowance) can also be claimed twice in a 4-year block tax-free.