Ask Readers: How to Save Maximum Tax

Last Updated on April 26, 2026 by teamtfl

A reader named Srinivas wrote to me in 2011 with what I called a dream question. He had already figured out the basic tax-saving framework on his own and asked: “Is there anything beyond 80C, mediclaim, infrastructure bonds, and home loan interest?”

He was right then. The fundamental challenge of Indian tax planning has not changed: there are surprisingly few legitimate ways to reduce taxable income, and most of them are already well-known.

What has changed dramatically since 2011 is the framework itself. The new tax regime, introduced as default from FY2023-24, has made most of Srinivas’s question irrelevant for a large portion of taxpayers. Infrastructure bonds (80CCF) he mentioned no longer exist. The mediclaim limit was Rs.15,000 then – it is Rs.25,000 to Rs.50,000 now.

So here is the 2026 answer to Srinivas’s question – updated for the world as it actually is.

First: which regime are you in?

This is the question Srinivas could not have faced in 2011 – it did not exist. From FY2023-24, the new tax regime became the default. If you have not explicitly opted out, you are in it.

Under the new regime: Lower slab rates, standard deduction of Rs.75,000, employer NPS contribution (80CCD(2)) – and essentially nothing else. The ELSS, PPF, insurance premiums, home loan interest, HRA – none of it applies. Tax planning in the traditional sense is largely irrelevant.

Under the old regime: Higher slab rates but all the deductions remain available. If your total deductions exceed approximately Rs.3.75 lakh, the old regime typically saves more tax. Below that, the new regime is usually better.

Determine this first. Everything else in this article applies only if you are on the old regime.

The maximum deduction framework – old regime, FY2025-26

Section 80C – Rs.1.5 lakh (the anchor)

The 80C limit has been Rs.1.5 lakh since 2014 and was not changed in Budget 2025. It includes EPF, PPF, ELSS, life insurance premiums, home loan principal, NSC, tuition fees, and Sukanya Samriddhi.

Most salaried employees already partially fill this through EPF. Check your Form 16 before investing more. If your EPF contribution is Rs.1.2 lakh, you need only Rs.30,000 more.

Best choices within 80C: ELSS (shortest lock-in, equity returns), PPF (safe, tax-free), NPS Tier 1 (pension corpus, but lock-in till 60).

Section 80CCD(1B) – additional Rs.50,000 for NPS

This is the one deduction that goes beyond the 80C limit. Contributions to NPS Tier 1 up to Rs.50,000 per year qualify for an additional deduction over and above 80C. If you are already maximising 80C and want to reduce tax further, this is the next logical step.

Note: NPS has a lock-in until age 60 and mandates 40% annuitisation at maturity. Factor this into your liquidity planning before contributing beyond EPF and PPF.

Section 80D – health insurance premiums (up to Rs.1 lakh)

Rs.25,000 for self, spouse, and children (Rs.50,000 if you are 60+). Additional Rs.25,000 for parents (Rs.50,000 if parents are senior citizens). Maximum combined: Rs.1 lakh.

This is money you should be spending on health insurance anyway. It is the most cost-effective deduction available – the insurance you need plus a tax benefit.

Section 24(b) – home loan interest (Rs.2 lakh)

Deduction up to Rs.2 lakh per year on interest paid on a home loan for a self-occupied property. For rented-out properties, the full interest is deductible – but set-off against other income is capped at Rs.2 lakh; the balance carries forward.

HRA – House Rent Allowance

If you receive HRA and pay rent, the exemption is the least of: actual HRA received, 50% of basic salary (in metro cities) or 40% (non-metro), or actual rent paid minus 10% of basic salary. This does not appear in 80C but is a significant tax saving for those paying rent.

80CCD(2) – employer NPS contribution (both regimes)

If your employer contributes to your NPS, up to 10% of basic salary (14% for central government employees) is deductible. This is available in both old and new regimes – the only meaningful deduction that crosses over. If your employer offers voluntary NPS enrollment, this is worth considering regardless of which regime you are in.

Beyond 80C – the honest answer to Srinivas’s question

Srinivas asked in 2011 whether there was anything beyond the standard framework. The honest answer then was: not much for a salaried employee. The honest answer in 2026 is the same.

Section 80G (charitable donations) works if you genuinely want to donate to SEBI/RBI registered charitable organisations – not as a pure tax play. HUF (Hindu Undivided Family) creation can split income between family members but has legal and administrative complexity that makes sense only in specific high-income situations. Gifts to major children can shift investment income but require genuine transfer and typically have a 5 to 7 year horizon before the benefit is meaningful.

The Direct Tax Code that Srinivas referenced in 2011 as a potential game-changer was eventually abandoned and replaced with the new tax regime in a different form. The hope that new instruments would emerge beyond 80C has not materialised in 15 years.

The best tax strategy for most salaried professionals in 2026 is not complex: calculate your regime, maximise whichever deductions apply, and accept that the Indian tax code gives salaried employees a limited toolkit. The real wealth creation happens through investing well – not through finding exotic deductions.

Also read: Simple Tax Planning Guide – Updated for FY2025-26

Frequently asked questions

Are you on the old or new tax regime? Have you calculated which one actually saves you more tax for your specific situation? Share in the comments – or share a question like Srinivas did and we can build a useful discussion.