Last Updated on April 14, 2026 by Hemant Beniwal
Every year between January and March, I get the same questions. Repeated, urgently, from engineers, doctors, senior executives — intelligent people who somehow get to March 15th without a tax plan.
The questions are rarely new. But the urgency is always real.
So here is a compilation of the most useful tax-saving questions — with honest, straightforward answers for the FY 2025-26 filing season.
⚡ Quick Answer
Tax saving should be the result of your investment planning — not the other way around. The best tax-saving instruments for most salaried individuals in FY 2025-26 are ELSS (3-year lock-in, equity returns), NPS (additional Rs 50,000 deduction under 80CCD(1B)), and health insurance premiums under 80D. Always choose the New Tax Regime vs Old Tax Regime based on your actual numbers — not what your colleague did.
Q: Should I choose the Old Tax Regime or the New Tax Regime for FY 2025-26?
This is the most important tax question for most salaried individuals right now.
The New Tax Regime (NTR) offers lower tax rates but removes almost all deductions — no 80C, no HRA, no 80D, no home loan interest deduction.
The Old Tax Regime (OTR) has higher rates but allows all standard deductions.
For someone with Rs 20+ lakh income who maximises 80C (Rs 1.5L), 80CCD(1B) NPS (Rs 50,000), 80D health insurance (Rs 50,000+), and HRA — the Old Tax Regime often still saves more tax. For someone with fewer deductions or lower income, the New Tax Regime’s lower rates frequently win.
The honest answer: run the actual calculation for your specific numbers. Do not choose based on what your friend or colleague chose. A 15-minute calculation can save you Rs 30,000-50,000 per year.
Confused about which tax regime saves you more money?
A quick review of your specific income and deductions gives you a clear answer — not a guess.
Q: I have not done any tax planning. It is February. What should I do?
First: stop panicking. Most instruments can still be invested before March 31st and will count for this financial year.
What you can still do in February-March: invest in ELSS mutual fund (counts for 80C), contribute to PPF, pay health insurance premium for 80D, make NPS contribution for 80CCD(1B), pay children’s school fees (counts for 80C if you have school-going children).
What you cannot do in February-March: start a new PPF account and expect full year benefits, change your HRA structure, restructure your salary.
The better lesson: start in April for the next year. Spreading Rs 1.5 lakh across 12 months as a SIP in ELSS is better than a lump sum in March — for your returns and your cash flow.
Q: What is the best 80C investment for someone who already has EPF and life insurance premiums?
This is the right question to ask — and most people do not.
EPF contributions (both yours and your employer’s share for your portion) count toward 80C. Life insurance premiums count toward 80C. If these two together already use up most of your Rs 1.5 lakh limit, do not add more instruments just to “use up” the deduction.
If you still have room, ELSS is almost always the best marginal 80C investment: 3-year lock-in (shortest among 80C options), equity market exposure (best long-term returns), and no guaranteed return premium products. Avoid adding endowment plans or money-back policies purely for 80C — the returns are poor and you are locking in an annual commitment for 10-20 years.
Q: I contributed to NPS this year. Can I claim both 80CCD(1) and 80CCD(1B)?
Yes. Section 80CCD(1) covers NPS contributions up to 10% of basic salary (within the Rs 1.5 lakh overall 80C ceiling). Section 80CCD(1B) provides an additional Rs 50,000 deduction for NPS contributions over and above the 80C limit.
This means a salaried individual who maximises both 80C (Rs 1.5 lakh) and 80CCD(1B) (Rs 50,000) gets a total deduction of Rs 2 lakh from these sections alone.
Important: 80CCD(1B) is only available in the Old Tax Regime. If you choose the New Tax Regime, this deduction is not available.
Q: My company offers a health insurance cover. Do I still need to buy personal health insurance for 80D benefit?
Company-provided group health insurance does not qualify for 80D deduction — because you are not paying the premium. Only premiums you personally pay qualify.
More importantly: company health insurance stops the day you resign, retire, or are laid off. This is exactly when you are most likely to need health coverage. Building your own health insurance, separate from employer cover, is essential — not just for tax saving, but for continuity of coverage through career transitions.
The 80D deduction (up to Rs 25,000 for self and family; additional Rs 25,000 for parents) is a secondary benefit. The primary reason to have personal health insurance is protection. The tax benefit is a bonus.
Q: I want to save tax and also invest. Which is the best instrument?
This is the right question framed in the right direction.
ELSS is the best overlap: it saves tax (80C) and it is an equity investment with long-term wealth creation potential. It has the shortest lock-in of all 80C instruments (3 years). Over 10+ years, ELSS funds have historically delivered CAGR in the range of 12-15%.
NPS (via 80CCD(1B)) is the second-best overlap: additional Rs 50,000 deduction, long-term equity exposure through the equity fund option (up to 75% equity allocation for those below 50), and compulsory long-term discipline. The drawback: you cannot access the full corpus at retirement — 40% must be annuitised.
Everything else — PPF, tax-saving FDs, NSC, endowment plans — offers guaranteed but inflation-matching or below-inflation real returns over long periods. Use them for safety and stability, not for wealth creation.
Q: Can my spouse and I both claim HRA independently?
Yes — if you both receive HRA as part of your separate salaries, you can both claim HRA exemption independently, provided you each pay rent from your own accounts. If only one of you officially pays rent (even if the other contributes informally), only that person can claim HRA.
A common mistake: couples where both earn and both pay rent, but only one files the rent receipts and claims HRA. This leaves a legitimate deduction unclaimed.
Q: Is it too late to do tax planning in March?
It is never too late to do what you can do right now. But the real answer is: tax planning done in March every year is expensive. Not because March investments do not count — they do. But because March planning is reactive, rushed, and often leads to wrong instrument choices.
The April approach is different: you look at your full-year income projection, your existing 80C commitments (EPF, insurance premiums), how much room remains, which instrument best matches your investment goal, and you spread the investment systematically across the year.
Tax saving is a side effect of good financial planning. When the plan is right, the tax efficiency follows naturally. 11 unusual ways to save tax in India — including retirement-specific strategies gives you ideas beyond the standard 80C list.
Frequently Asked Questions on Tax Saving
Which tax saving investment gives the best returns in India?
ELSS (Equity Linked Savings Scheme) mutual funds have the best return potential among all 80C instruments — with 10+ year historical CAGR of 12-15% for diversified equity funds. They also have the shortest lock-in at 3 years. NPS is the second-best for returns via the equity option, with the added benefit of an extra Rs 50,000 deduction under 80CCD(1B). PPF and tax-saving FDs are safe and liquid in 15 years and 5 years respectively, but real returns after inflation are often minimal.
How do I decide between the Old and New Tax Regime?
Run the actual numbers for your specific income and deductions — do not rely on rules of thumb. Generally, the Old Regime wins if you have significant HRA, home loan interest, and can fully utilise 80C + 80D + 80CCD(1B). The New Regime often wins for those with lower deductions or simpler tax profiles. The break-even point moves every budget year as rates change. A 15-minute calculation each April is the only reliable way to choose.
Can I invest in both ELSS and PPF for 80C?
Yes. Both qualify under Section 80C, which has a combined ceiling of Rs 1.5 lakh per financial year. You can invest in ELSS for growth and equity exposure, and in PPF for guaranteed, tax-free debt returns. Many advisors recommend a combination for investors who want both growth potential and a safe, government-backed debt component. The allocation between them should depend on your overall asset allocation and proximity to retirement.
Is NPS worth investing in beyond the 80CCD(1B) tax benefit?
It depends on your retirement planning structure. NPS forces long-term discipline (you cannot withdraw the full corpus before 60), offers genuine equity exposure, and has low fund management charges. The 40% annuity requirement at maturity is the main drawback — especially since annuity rates in India are modest and annuity income is taxable. For most salaried individuals, the Rs 50,000 80CCD(1B) deduction alone justifies the annual NPS contribution. Whether to go beyond that depends on your other retirement corpus sources.
Tax saving is not a March activity. It is not a product category. It is a natural outcome of a financial plan built around your real goals — executed consistently throughout the year.
The best tax saving is the kind you never have to rush.
💬 Your Turn
What is your most pressing tax question for this year? Or what tax mistake have you made in the past that you would warn others about? Add it in the comments — the most useful answers come from real experience, not textbooks.
Very good explanation of various tax saving instruments.
If I invest in ELSS, will the benefit under section 80C available for 1 year or three years. For eg: if I invested 50,000 in 2016 under ELSS and I already claimed benefit in 2016. Is it possible to claim benefit under section 80C in 2017 and 2018 as well on the investment of 50,000 in 2016.
Hi Sourabh
No, you can avail the benefits of the 80C deduction for only one financial year i.e. the year in which contribution is made.
What would be the taxation on surrendered value of traditional life insurance plan?
Hi Samir
As per Section 10(10D) of the Income Tax Act, 1961 the amount of sum assured plus any bonus (i.e. the policy proceeds) paid on maturity or surrender of policy or on the death of the insured are completely tax-free for the receiver.
Kindly advise if there is a limit on Employer’s Contribution to PF being tax free or is the entire Employer’s Contribution to PF tax free?
Read on some site that an amendment was introduced in the Finance Bill, 2016 to make any Employer’s contribution above of Rs. 1.5L taxable in the hand of employee and hence the doubt.
Hi Gaurav
If an employer contributes over and above 12% of basic pay of Employees salary than it will directly be added to the Income of the Employee.
Hi Gourav
Employer Contribution: 13.61 % (8.33% towards Pension, 3.67% towards PF, 1.10% towards ULDI (linked Insurance) and 0.51% towards administrative charge) of the Pay/Basic Salary.
Dear Sir,
I prematurely exited from NPS. On exit I received 80% of the remaining corpus, amounting to around RS 25,000/- (20% of which I had already withdrawn, on which I paid tax also).
Please tell me what is my tax liability on this amount, and how to calculate tax on this amount and how and where to show this in ITR 2 form. I fall in the 10% tax bracket.
Faithfully, yours
Sanjay k srivastava
Hi Sanjay
Consult to a good CA regarding this issue.
I am 23 years old and my first job is in PSU and I am earning Rs 44000 PM and I am looking for some tax saving option and currently I am only operating one PPF account. Please advise me some other tax saving investment for long term benefit?
Hi Mridul
You can invest in NPS, ELSS, NSC, Tax Saving FDs etc…for 80C deduction.
And you must take a term Insurance(80c deduction) and Medical insurance(80D deduction).
I wanted to understand the tax computation for the following scenario:
Mutual fund folio is in my wife’s name (single holder) however the money being invested would come from my account. In this case, who will be liable to pay the tax in case of returns from the mutual fund? Will it be my wife or will it be me?
Hi Abhijeet,
In MF investing from other’s account is not possible.
Dear Sirs, Good Morning.
Request to please do guide me on the next : I am paying tax on highest slab in India.
How much amounts I can pay to my wife, daughter, son every year as gift ( Bank draft or transfer from my account to their account) to save tax.
Best Regards,
Surjeet Singh
Hi Surjeet,
Check this https://www.retirewise.in/understanding-clubbing-of-income-blunders-people-make/
My daughter who is studying has been given gifts oh his qualifying exams amounting to rs 3 Lacs in the year 2013 which she deposit in a bank for 3 year fd.the bank on maturity has deducted 10 percent TDs as she has a Pan card.however she has not file return for any year as she has no any income except some pocket money and gift money.now my question is whether she has to file return and can she claim for a refund.
Yes – she can file & claim refund.
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