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How to Save Income Tax Legally in India – Tips for Salaried Professionals (2025)

4/5/20252 min read

How to Save Income Tax Legally in India – Tips for Salaried Professionals (2025)

Tax season doesn’t have to mean stress and last-minute panic. With the right strategies, salaried individuals in India can save a significant portion of their income legally while staying fully compliant with tax laws.

This blog provides practical, up-to-date tips to help you optimize your salary structure, claim eligible deductions, and reduce your tax liability under both the old and new tax regimes in 2025.

Understand the Two Tax Regimes (2025)

Before planning, know your tax regime:

Old Regime: Allows deductions and exemptions under 80C, HRA, LTA, etc.
New Regime: Lower tax slabs, but no major exemptions or deductions.

For most salaried professionals, the old regime is more tax-efficient — especially if you’re claiming 80C, housing loan, HRA, and other allowances.

Smart Ways to Save Income Tax Legally

1. Use the Full ₹1.5 Lakh Limit Under Section 80C

Popular options:

ELSS mutual funds (highest return potential)
PPF (tax-free long-term returns)
Life insurance premiums
NPS (additional deduction under 80CCD(1B))
5-year tax-saving FDs

Max out this section with a mix of low-risk and high-growth investments.

2. Claim HRA (House Rent Allowance)

If you’re living in a rented house and getting HRA as part of your salary:

Submit rent receipts or rental agreement
Claim deduction based on your basic salary, HRA received, rent paid, and city

Even if you pay rent to parents, you can claim HRA — provided it’s genuine and declared in their income.

3. Use Section 80D – Medical Insurance Premium

Deduction up to:

₹25,000 (self + family)
₹50,000 (parents if senior citizens)

Ensure you pay the premium via non-cash modes. Preventive health checkups also qualify up to ₹5,000.

4. Claim Home Loan Deductions

If you own a house and pay EMIs:

Principal under Section 80C
Interest under Section 24(b) (up to ₹2 lakh)
Additional ₹1.5 lakh under 80EEA for first-time affordable housing buyers

This is one of the most effective ways to save tax while building an asset.

5. Use LTA (Leave Travel Allowance)

You can claim LTA for travel within India

Only for travel costs (no hotel/meals)
Only for self and immediate family
Must have valid travel proof (tickets/invoices)
Can be claimed twice in a block of 4 years

Current block: 2022–2025.

6. Invest in NPS for Additional ₹50,000 Deduction

Besides the ₹1.5 lakh limit under 80C, you can claim an additional ₹50,000 under Section 80CCD(1B) by contributing to NPS. This is a powerful tool for both tax saving and retirement planning.

7. Use Standard Deduction (₹50,000)

All salaried individuals are automatically eligible for this. No need for proof. Just make sure your employer reflects it in Form 16.

8. Reimbursements & Allowances (Check Salary Structure)

If your company allows:

Food coupons or meal cards (tax-free up to ₹50/day)
Mobile/Internet reimbursements
Books and research allowance
Uniform or travel reimbursements (on actuals)

Optimize your salary structure with HR to increase your post-tax income.

9. Donations Under Section 80G

Donations to registered charitable institutions are eligible for 50% to 100% deduction. Always collect a valid receipt with PAN of the trust.

10. Education Loan Interest – Section 80E

If you’re repaying an education loan, you can claim a deduction on the interest paid for up to 8 years, with no upper limit.

Final Thoughts

Tax planning isn’t about evading tax — it’s about using legal, government-approved tools to retain more of your hard-earned income. With proper planning, salaried individuals can bring down their taxable income significantly while also building long-term assets.

Need help building your tax-saving strategy or filing your taxes correctly? One Solution offers personalized tax consultation, proof submission guidance, and investment planning — all under one roof.