Tax Saving Tips for Tax Year 2026-27 — Legal Ways to Reduce Income Tax

Updated: 3 June 2026 | Income-tax Act, 2025 | Old & New Regime

To save maximum income tax in Tax Year 2026-27 under the old regime: invest ₹1.5L in 80C (PPF/ELSS/LIC), pay ₹25K health insurance premium (80D), contribute ₹50K extra to NPS (80CCD(1B)), claim HRA if renting, and deduct home loan interest under Section 24(b). Under the new regime, only standard deduction ₹75K and employer NPS contribution apply.

₹69,750

Maximum extra tax saved (old regime, ₹10L income, 30% slab)
₹1.5L (80C) + ₹50K (80CCD(1B)) + ₹25K (80D) = ₹2.25L extra deductions vs new regime. At 30% + 4% cess ≈ ₹69,750 tax saved. Add HRA and home loan for more.

Old Regime — Complete Tax Saving Checklist

These deductions and exemptions are only available under the old tax regime. Opt for old regime in your ITR to claim them.

1. Section 80C Up to ₹1,50,000

The most widely used deduction — 80C covers a basket of investments and expenses:

PPF — 7.1% tax-free returns, 15-year lock-in, government-backed
ELSS mutual funds — 3-year lock-in (shortest in 80C), market-linked returns
Life insurance premium — LIC, term, or endowment policies
NSC — 7.7% guaranteed, 5-year lock-in, post office scheme
Home loan principal repayment — included within ₹1.5L 80C limit
Children's tuition fees — up to 2 children, full-time school/college
Sukanya Samriddhi Yojana — for girl child, 8.2% tax-free, EEE status
5-year tax saving FD — at bank or post office, lock-in 5 years

2. NPS Extra Deduction — Section 80CCD(1B) Additional ₹50,000

This deduction is over and above the 80C limit of ₹1.5L — total becomes ₹2L:

Invest ₹50,000 in NPS Tier-1 account
Combined with 80C: total deduction ₹1.5L + ₹50K = ₹2,00,000
NPS also gives retirement corpus with partial tax-free withdrawal at maturity

3. Health Insurance — Section 80D Up to ₹1,00,000

Self, spouse, children: ₹25,000 (₹50,000 if any member is senior citizen)
Parents' premium: additional ₹25,000 (₹50,000 if parents are senior citizens)
Preventive health check-up: ₹5,000 within the overall 80D limit

4. HRA Exemption — Section 10(13A) Varies

If you receive HRA as part of salary and pay rent, claim HRA exemption
Exemption = lowest of: actual HRA received / actual rent paid minus 10% of basic / 50% of basic (metro) or 40% (non-metro)
Can pay rent to parents — but parents must declare rental income in their ITR
Keep rent receipts and landlord's PAN (if annual rent exceeds ₹1L)

5. Home Loan Benefits Up to ₹3.5L+

Section 24(b): Interest deduction up to ₹2L per year on self-occupied property
Section 80C: Principal repayment included in ₹1.5L 80C limit
Section 80EEA: Additional ₹1.5L for first-time buyers — stamp duty ≤ ₹45L (check if extended for Tax Year 2026-27)

6. Other Deductions Various

80TTA: ₹10,000 on savings account interest (all individual taxpayers)
80TTB: ₹50,000 on all bank/post office interest — senior citizens only (replaces 80TTA)
80G: Charitable donations — 50% or 100% deduction depending on fund. Keep donation receipt with 80G registration number.
Professional tax paid: Deductible under Section 16 from salary income

New Regime — What Deductions Are Available

New Regime — Limited Deductions

Standard deduction: ₹75,000 — for salaried employees and pensioners
Employer NPS contribution — Section 80CCD(2): up to 10% of basic salary (14% for government employees). This is deductible even in new regime.
No 80C, 80D, HRA, home loan interest, or other Chapter VI-A deductions are available

Which regime is better for you? New regime is better for most people with total deductions under ₹3.75L. If your 80C + 80D + HRA + home loan interest exceeds this, old regime saves more. Use our calculator to find your break-even →

Tax Saving Summary — Old Regime at a Glance

Section	What It Covers	Max Deduction
80C	PPF, ELSS, LIC, NSC, home loan principal, tuition	₹1,50,000
80CCD(1B)	NPS additional contribution	₹50,000
80D	Health insurance premium (self + parents)	₹1,00,000
Section 24(b)	Home loan interest (self-occupied)	₹2,00,000
HRA (10(13A))	Rent paid by salaried employees	Varies
80TTA / 80TTB	Savings / fixed deposit interest	₹10,000 / ₹50,000
80G	Donations to approved funds	50% or 100%
Potential combined deduction (with home loan)		₹6L+

Frequently Asked Questions

What is the best tax saving investment for 2026-27?

It depends on your goals. For pure tax saving with the lowest lock-in: ELSS mutual funds (3-year lock-in, market-linked returns, Section 80C). For safe guaranteed returns: PPF (7.1%, 15-year) or NSC (7.7%, 5-year). For retirement with an extra deduction over and above 80C: NPS under Section 80CCD(1B). For protection: term insurance (80C) and health insurance (80D).

Can I invest in tax saving instruments in March to claim for Tax Year 2026-27?

Yes, but last-minute investments should be in instantly-available options such as ELSS online or NPS online. PPF contributions must be made before 5 April to get the current year credit. Avoid cash insurance payments close to year-end. Investments made between 1 April and 31 March count for that Tax Year.

What is the maximum income tax I can save under the old regime?

At the 30% tax slab: 80C ₹1.5L saves ₹46,800; 80CCD(1B) ₹50K saves ₹15,600; 80D ₹50K saves ₹15,600; Section 24(b) home loan interest ₹2L saves ₹62,400 — approximately ₹1.4 lakh total tax saved (with 4% cess). Adding HRA exemption, 80G, and other deductions can push total savings higher.

Should I choose the old or new tax regime for tax saving?

Use our Old vs New Regime Calculator. If your total deductions — 80C + 80D + HRA + home loan interest beyond the standard deduction — exceed the break-even (approximately ₹3.75L for ₹10L income), the old regime saves more tax. For most salaried employees with fewer deductions, the new regime with standard deduction of ₹75,000 is simpler and often better.

Is investing only to save tax a good strategy?

Tax saving should be secondary to your financial goals. Invest in instruments that match your risk appetite and investment horizon first. ELSS gives market-linked returns plus 80C. PPF gives safe guaranteed returns plus 80C. Do not invest in poor-quality insurance or low-return products just for the tax benefit — the tax saving rarely justifies a bad investment.

Section 80C Deductions Section 80D Old vs New Tax Regime Income Tax Calculator HRA Calculator

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