Every salaried employee in India looks forward to maximizing take-home income while staying fully compliant with tax laws. The good news is that the Indian Income Tax Act provides several provisions that allow you to save tax legally. With smart planning, you can claim deductions, exemptions, and benefits without falling into last-minute panic during the financial year.
In this blog, we’ll cover the most effective and legal tax-saving tips for salaried employees in India.
1. Make the Most of Section 80C
Section 80C is the most widely used tool for salaried professionals to reduce taxable income. The maximum deduction allowed is ₹1.5 lakh per year. Eligible options include:
- Employee Provident Fund (EPF)
- Employee Provident Fund (EPF)
- Public Provident Fund (PPF)
- Life Insurance Premiums
- National Savings Certificate (NSC)
- Principal Repayment of Home Loan
- Tuition Fees for Children
Smart Tip: ELSS offers dual benefits—tax savings and higher growth potential through equity markets
2. Claim Deductions Under Section 80D (Health Insurance)
Medical emergencies can drain savings, but health insurance helps you stay financially secure while offering tax benefits.
- Deduction of ₹25,000 for premiums paid for self, spouse, and children.
- Additional ₹50,000 deduction if premiums are paid for senior citizen parents.
- Preventive health check-ups up to ₹5,000 are also included.
3. Utilize House Rent Allowance (HRA)
If you live in rented accommodation, you can claim exemption on House Rent Allowance (HRA). The exemption amount depends on:
- Actual HRA received from employer.
- Rent paid minus 10% of basic salary.
- 50% of basic salary (for metro cities) or 40% (for non-metro cities)
Smart Tip: Always keep rent receipts and landlord PAN (if rent exceeds ₹1 lakh annually).
4. Take Advantage of Leave Travel Allowance (LTA)
Salaried employees can claim tax exemption on travel expenses incurred within India under Leave Travel Allowance (LTA). This covers air, train, or bus fares for family trips.
Smart Tip: LTA exemption is available for two journeys in a block of four years. Save your travel tickets as proof.
5. Contribute to the National Pension System (NPS)
Retirement planning is not only wise but also tax-efficient. Contributions to NPS allow you to claim:
- An additional deduction of ₹50,000 under Section 80CCD(1B) (over and above 80C).
- Employer contributions up to 10% of salary are also deductible under Section 80CCD(2).
6. Claim Home Loan Benefits
If you have taken a home loan, you can claim:
- Principal repayment under Section 80C (up to ₹1.5 lakh).
- Interest deduction under Section 24(b) (up to ₹2 lakh per year).
Smart Tip: For first-time homebuyers, Section 80EEA offers an additional deduction on interest.
7. Explore Other Deductions
- Section 80E – Deduction for education loan interest.
- Section 80G – Donations to approved charitable institutions.
- Standard Deduction – A flat deduction of ₹50,000 available to all salaried employees.
Tax planning is not about avoiding taxes—it’s about using legal provisions wisely to reduce liability and increase savings. For salaried employees, combining deductions under Section 80C, 80D, HRA, LTA, NPS, and home loan benefits ensures maximum savings while staying compliant.
The key is to plan investments and expenses at the start of the financial year rather than rushing at the end. By following these tips, you can legally save tax in India while building long-term financial security.