Introduction
Are you losing a large portion of your hard-earned money to income tax? Tax planning in 2025 is not just about saving money, but the art of smart investing. The Government of India has made several changes in tax rules through Budget 2024 and 2025, understanding which can save you lakhs of rupees.
In this blog, we will discuss Income Tax Saving Tips (2025) in detail and learn how you can reduce your tax liability by choosing the right Old Tax Regime and New Tax Regime.
1.New Tax Regime vs Old Tax Regime: Which is better for you?
- The first step to saving taxes in 2025 is choosing which tax structure you choose.
- New Tax Regime (Default): Tax rates are lower in this, but you cannot avail most of the deductions like 80C, 80D. However, now it offers a standard deduction of ₹75,000.
- Old Tax Regime: If you have large investments like home loan, insurance and children’s tuition fees, this option may be better for you.
2.Income Tax Saving Tips under Section 80C (Old Regime)
If you are in the old tax regime, you can claim a deduction of up to ₹1.5 lakh under Section 80C. The main investment options are:
1.PPF (Public Provident Fund):
- What is it: It is a government-backed savings scheme.
- Tenure: Lock-in period of 15 years.
- Returns: Currently around 7.1% (varies).
- Advantage: It falls under the ‘EEE’ category. That means investment, interest and maturity amount all three are tax-free.
2.ELSS (Equity Linked Savings Scheme): Best Income Tax Saving Tips:
- What is it: It is a tax-saving mutual fund.
- Tenure: Lock-in of only 3 years (lowest).
- Returns: Market-dependent (typically 12-15% potential).
- Advantage: Best for those who want higher returns with less risk.
3.EPF (Employee Provident Fund): Safe Income Tax Saving Tips
- What is it: Compulsory savings for the salaried class.
- Benefit: 12% of your basic salary goes into this, which counts under 80C. The interest earned on this is also tax-free (up to a certain limit).
4.Life Insurance Premium: Smart Income Tax Saving Tips under Section 80C:
- What is: Premium paid on a policy taken out for yourself, spouse or children.
- Advantage: Security as well as tax benefits. Keep in mind that the sum assured should be at least 10 times the premium.
5.SSY (Sukanya Samriddhi Yojana):
What is it: Government scheme for the future of daughters.
Returns: Offers higher interest than PPF (around 8.2%).
Benefit: You can invest in the name of your daughter below 10 years of age. This is also ‘EEE’.
6.NSC (National Savings Certificate): Safe Income Tax Saving Tips:
What is it: 5-year savings scheme of the Post Office.
Advantage: The investment is safe and the interest earned is u/s 80C every year (except the last year).
7.Tax Saving FD (5 Years): Safe Income Tax Saving Tips:
What is it: 5 year fixed deposit in banks.
Advantage: Safe investment, but its interest is taxable.
8.Home Loan Principal:
What is: If you have taken a home loan, the ‘principal’ paid over the year.
Benefit: Interest is exempted under Section 24, while principal is exempted under Section 80C.
9.Children’s Tuition Fees:
What is:Tuition Fees of any school, college or university located in India.
Limit: Maximum 2 children. This does not include donations or development fees.
10.Income Tax Saving Tips with SCSS (Senior Citizens Savings Scheme:
What is it: For people above 60 years of age.
Benefit: Senior citizens get 80C exemption and quarterly interest on investment in this.
11.Unit Linked Insurance Plan (ULIP):
What is it: A combination of insurance and investment.
Advantage: If you hold it for 5 years, it gives tax free returns.
3.Income Tax Saving Tips with National Pension System (NPS)
NPS is an excellent option for retirement. Apart from the ₹1.5 lakh limit under Section 80C, you can get an additional ₹50,000 exemption under Section 80CCD(1B). That means a total deduction of ₹2 lakh.
4.Health Insurance (Section 80D): Smart Income Tax Saving Tips
In times of inflation, health insurance not only provides protection but also saves tax:
- For self, wife and children: Up to ₹25,000.
- For parents below 60 years of age: Additional ₹25,000.
- If the parent is a senior citizen: up to ₹50,000.
- Preventive Health Checkup: This includes an additional discount of ₹5,000.
5.Tax benefits on home loans (Section 24b and 80C)
If you have taken a loan to buy a house, you can save tax in two ways:
- Interest: Interest up to ₹2 lakh per year is exempted under Section 24(b).
- Principal: Deduction on the principal amount of the loan installment under Section 80C.
6.Avail HRA Exemption: Smart Income Tax Saving Tips for Salaried Employees
If you live in a rented house and you get HRA in your salary, you can claim tax exemption. For this, you will have to provide the landlord’s PAN card (if the rent is more than ₹1 lakh per annum) and rent receipts.
7.Education Loan(Section 80E)
If you have taken a loan for higher education for yourself, your spouse or your children, then the entire interest paid on that loan is tax exempt. There is no maximum limit for this.
8.Deduction on Savings Account Interest (Section 80TTA/80TTB)
Ordinary citizens: Interest earned from savings account up to ₹10,000 is not taxable (Section 80TTA).
Senior Citizens: Interest on bank or post office deposits up to ₹50,000 is exempt (Section 80TTB).
9.Savings through donations (Section 80G)
If you donate to a recognised charitable trust or government fund (like PM Relief Fund), you can claim 50% or 100% of the donated amount as tax exemption.
10.Smart Tax Planning Tips for 2025
- Start investing on time: Don’t wait for the end of the financial year (March). Start your SIP and investments from April itself.
- Use Tax-Free Income: Agricultural income, PPF interest and maturity amount are completely tax free.
- Standard Deduction: Remember, in 2025, salaried individuals are getting the benefit of Standard Deduction of ₹75,000 in both the tax regimes.
Conclusion
With the right income tax saving tips, saving income tax becomes easy. Evaluate your income, deductions, and expenses to decide whether the Old versus New Tax Regime suits you best.
If you want to build wealth for the long term, then prefer options like ELSS and NPS. For more information and official updates related to tax saving, you can visit the Income Tax Portal of the Government of India.
Q1: Is the Standard Deduction available in both the New and Old Regimes in 2025?
Yeah. As per the 2025 rules, salaried employees and pensioners get a standard deduction of ₹50,000 in both the tax regimes (New Tax Regime and Old Tax Regime).
Q2: Do I need to provide my landlord’s PAN to claim HRA?
Yeah. If you pay a total rent of more than ₹1 lakh in a year (i.e. more than ₹8333 per month), you are required to provide the landlord’s PAN card number to your employer while claiming HRA.
Q3: How much of children’s tuition fees can be claimed within the 80C limit of ₹1.5 lakh?
You can claim the entire tuition fees paid for up to two of your children under Section 80C, provided the total is within the limit of ₹1.5 lakh. This does not include school/college development fees, donations or private coaching fees.
Q4: Is rent agreement mandatory to claim HRA (House Rent Allowance)?
Yes, rent agreement is required to claim HRA exemption. If you pay rent of more than ₹1 lakh annually, then the PAN card number of the landlord is also mandatory.
Q5: What is the amount of standard deduction for FY 2025-26 (AY 2026-27)?
For the financial year 2025-26, the standard deduction amount for salaried individuals and pensioners is ₹50,000 (under the old tax regime). Under the new tax regime, this amount has been increased to ₹75,000.
Q6: Can I save tax by paying my parents’ health insurance premium?
Yes, you can do this under section 80D. If your parents are below 60 years of age, you can claim an additional deduction of ₹25,000, and if they are senior citizens (60 years or above), an additional deduction of up to ₹50,000 is available.
Q7: Why is ELSS (Equity Linked Savings Scheme) better than FD for saving tax?
The lock-in period of ELSS is only 3 years, while that of tax saving FD is 5 years. Moreover, ELSS aims to provide market-based returns, which can be much higher than the fixed interest rate of FD, thereby helping in building better wealth in the long term.
Q8.Where else can I save tax apart from the ₹1.5 lakh limit under Section 80C?
Section 80CCD(1B): Investment of additional ₹50,000 in National Pension System (NPS).
Section 80D: Additional exemption on health insurance premium from ₹25,000 to ₹50,000.
Section 24(b): Home loan interest deduction up to ₹2 lakh.
Disclaimer: This blog is for educational purposes only. Before filing taxes, definitely take advice from a professional tax consultant or CA.
