11 Unusual Ways of Saving Tax in India (2026) – Including the Retirement Tax Nobody Plans For

Last Updated on April 8, 2026 by Hemant Beniwal

“The hardest thing in the world to understand is the income tax.” – Albert Einstein

Most Indians plan their taxes in the last two weeks of March. They call their CA, scramble for 80C investment proofs, and wonder whether to buy an ELSS or add to their PPF. They do this every year. They pay more tax than they need to every year.

Tax planning is not a February activity. It is a year-round discipline. And the most powerful tax-saving moves are not the standard ones everyone knows – they are the unconventional ones that most people miss entirely.

11 Unusual Ways to Save Tax in India

1. Route Investments Through Senior Citizen Parents

Available: Old and New Regime

If your parents are senior citizens with income in a lower tax slab than yours, gift them money and let them invest it. Gifts to parents are not taxable. Income from their investments is taxed at their (lower) slab rate – or may be entirely tax-free if their income is below the basic exemption limit. Senior citizen FD rates are also 0.25-0.5% higher. Senior Citizen Savings Scheme (SCSS) at 8.2% is particularly attractive for this purpose.

2. Employer NPS Contribution Under Section 80CCD(2)

Available: Old and New Regime

This is one of the most underused provisions in the tax code. Your employer can contribute to NPS on your behalf, and you can claim this as a deduction under Section 80CCD(2) – over and above the Rs 1.5 lakh 80C limit and the Rs 50,000 80CCD(1B) limit. Budget 2024 increased the limit to 14% of basic salary under the New Tax Regime (up from 10% previously). Under the Old Tax Regime, the limit remains 10%. For a senior executive with a Rs 3 lakh/month basic, the New Regime limit means an additional Rs 5 lakh annual deduction. Restructure your CTC to move money into this bucket.

3. Pay Rent to Parents and Claim HRA

Old Tax Regime ONLY

If you live in your parents’ house and they own it, you can pay them rent and claim HRA exemption – but only if you are on the Old Tax Regime. Under the New Tax Regime, HRA exemption is completely unavailable. If you are on the Old Regime: the rent becomes income in your parents’ hands (taxed at their lower slab), they get 30% standard deduction on rental income, and you claim full HRA exemption. The family net tax outgo reduces significantly. Maintain a rent agreement, rent receipts, and bank transfer records.

4. Pay Parents’ Health Insurance Premium

Old Tax Regime ONLY

Section 80D allows an additional deduction for health insurance premiums paid for parents – over and above your own family’s premium. For parents aged 60-80: Rs 50,000 additional deduction. For parents above 80 (who may not get health insurance): Rs 50,000 for medical expenses incurred. Section 80DDB allows up to Rs 1 lakh deduction for medical expenses for specified diseases in parents above 60.

5. Donate to Specified Charities Under Section 80G

Old Tax Regime ONLY

Donations to PM National Relief Fund, PM CARES Fund, and certain other notified funds get 100% deduction with no upper limit. Donations to many other charities get 50% deduction. Always get an 80G receipt and verify the charity’s registration status on the Income Tax portal before donating.

6. Annual LTCG Harvesting

Available: Old and New Regime

Long-term capital gains on equity up to Rs 1.25 lakh per year are tax-free. Most investors let this exemption go unused every year. The strategy: before March 31, review your equity portfolio. If you have unrealised LTCG below Rs 1.25 lakh, sell and immediately repurchase the same units. You reset your cost basis to the current price, locking in tax-free gains. Do this every year and the lifetime tax saving compounds substantially.

7. Set Off Capital Losses

Available: Old and New Regime

Capital losses can be set off against capital gains. Short-term capital losses can be set off against both short-term and long-term capital gains. Long-term capital losses can only offset long-term capital gains. Losses can be carried forward for 8 assessment years. Most investors forget to report capital losses in their ITR – and then lose the ability to carry them forward. Always show your losses, even in years when you cannot set them off immediately.

8. Use HUF as a Separate Tax Entity

Available: Old and New Regime

A Hindu Undivided Family (HUF) is a separate tax entity with its own PAN, its own basic exemption limit, and its own 80C deductions. If you have income sources beyond salary – rental income, business income, capital gains – running them through an HUF can substantially reduce your effective tax rate. Family members can gift money to the HUF; income from investments made from those gifts is taxed in the HUF’s hands at lower rates.

9. Gift or Loan Money to Adult Children

Available: Old and New Regime

If your adult children are in a lower tax slab than you, gifting or interest-free loaning money to them for investment purposes shifts the tax burden to a lower bracket. Income from their investments is taxed at their rate. For families where parents are in the 30% bracket and children are just starting work in the 5-10% bracket, the combined tax saving across the family can be significant.

10. Donate to Political Parties Under 80GGC

Old Tax Regime ONLY

Donations to registered political parties via cheque, NEFT, or UPI qualify for 100% deduction under Section 80GGC. The deduction is available up to 10% of your gross income. This is an unusual provision that most taxpayers are unaware of.

11. Tax-Efficient Withdrawal Planning in Retirement

Available: Old and New Regime

This is the strategy that most tax planning articles never reach – and it is arguably the most valuable one for senior executives approaching retirement.

The Retirement Tax Time Bomb – Why Withdrawal Sequencing Matters More Than Accumulation Tax

Here is something almost nobody talks about in Indian personal finance.

Most tax planning focuses on the accumulation phase – how to save tax while building wealth. But for a senior executive with Rs 3-5 crore in various buckets (EPF, PPF, NPS, equity mutual funds, FDs, property), the tax liability at withdrawal can be enormous – and is almost entirely avoidable with proper planning.

The core insight: different retirement assets have different tax treatments. EPF and PPF are fully tax-free on withdrawal. NPS is 60% lumpsum tax-free, annuity is taxed as income. Equity mutual fund LTCG is taxed at 12.5% above Rs 1.25 lakh. FD interest is fully taxable at slab rate.

If you draw down your retirement corpus in the wrong sequence, you could be paying 30% tax on income that could have been taxed at 0% or 12.5% instead.

The difference between an optimal and suboptimal withdrawal sequence for a Rs 4 crore corpus over 25 years can easily exceed Rs 50-75 lakh in total tax paid. This is not theoretical – it is a real planning opportunity that most people never act on because they never calculate it.

“A fine is a tax for doing something wrong. A tax is a fine for doing something right. But paying more tax than you legally owe – that is just a planning failure.”

– Hemant Beniwal, CFP, CTEP | Founder, RetireWise

Read next: NPS – A Retirement Advisor’s Honest Review (Tax Benefits and More)

Tax planning is not about gaming the system. It is about understanding it well enough to keep what you have legitimately earned. The tax code offers these provisions specifically because parliament wanted to incentivise certain behaviours – retirement savings, healthcare, charitable giving. Using them is not aggressive. It is intelligent.

Plan in April. Pay less in March. Keep more for retirement.