27 Income Tax Saving Options in India for Salary, Professionals and Businesses
Income tax savings depend first on the tax regime selected. This guide explains 27 familiar deductions and exemptions, identifies outdated limits, and clarifies which benefits generally require the old tax regime.
Old tax regime versus new tax regime
The new regime is the default for eligible individual taxpayers. It offers lower slab rates and a larger rebate, but most deductions such as 80C, 80D, HRA and 80G are not available. The old regime permits eligible deductions and exemptions, subject to conditions. Taxpayers with business or professional income must follow additional rules for opting out or switching regimes.
| Taxable income for AY 2026-27 | New-regime marginal rate |
|---|---|
| Up to Rs. 4,00,000 | Nil |
| Rs. 4,00,001 - 8,00,000 | 5% |
| Rs. 8,00,001 - 12,00,000 | 10% |
| Rs. 12,00,001 - 16,00,000 | 15% |
| Rs. 16,00,001 - 20,00,000 | 20% |
| Rs. 20,00,001 - 24,00,000 | 25% |
| Above Rs. 24,00,000 | 30% |
For AY 2026-27, eligible resident individuals under the new regime may receive a section 87A rebate up to Rs. 60,000 when total income does not exceed Rs. 12 lakh, subject to restrictions including special-rate income. Salaried taxpayers may also claim the Rs. 75,000 standard deduction in the new regime; under the old regime it is Rs. 50,000. Surcharge and 4% health and education cess may apply. Official AY 2026-27 tax slab guidance.
Quick comparison of popular deductions
| Benefit | Old regime | New regime |
|---|---|---|
| Section 80C investments | Up to Rs. 1.5 lakh combined | Generally unavailable |
| HRA exemption | Subject to formula | Generally unavailable |
| Standard deduction on salary | Rs. 50,000 | Rs. 75,000 |
| Employer NPS, section 80CCD(2) | Subject to limits | Available subject to limits |
| Health insurance, section 80D | Subject to limits | Generally unavailable |
| Self-occupied home loan interest | Up to Rs. 2 lakh if eligible | Unavailable |
27 income tax saving options explained
1. Employee provident fund and PPF - section 80C
Employee EPF contributions, eligible PPF deposits and other qualifying investments form part of the combined Rs. 1,50,000 ceiling under sections 80C, 80CCC and 80CCD(1). Employer EPF contributions are governed by separate rules. Generally this deduction is not available under the new regime.
2. House rent allowance - section 10(13A)
Under the old regime, HRA exemption is the least of actual HRA received, eligible rent paid minus 10% of salary, or 50% of salary in Delhi, Mumbai, Kolkata and Chennai (40% elsewhere). Salary for this purpose includes qualifying DA and turnover-based commission. Landlord PAN reporting is generally required when annual rent exceeds Rs. 1,00,000; separate withholding obligations may arise for rent paid to a non-resident.
3. Medical reimbursement - historical exemption
The former general Rs. 15,000 medical reimbursement exemption was withdrawn from FY 2018-19. Do not claim it as a current general deduction; prescribed medical facilities and benefits may have separate treatment.
4. Conveyance allowance - historical exemption
The former Rs. 1,600 monthly exemption for ordinary commuting was withdrawn from FY 2018-19. Specific official-duty conveyance allowances and qualifying disability-related transport allowances may still receive prescribed treatment.
5. Leave travel concession - section 10(5)
In the old regime, eligible domestic travel fare for the employee and qualifying family may be exempt subject to Rule 2B, journey, block-year and documentary requirements. Hotels and meals are not covered by the fare exemption. It is generally unavailable under the new regime.
6. Professional tax - section 16(iii)
Professional tax actually paid may be deducted from salary under the old regime, subject to the applicable state levy (commonly capped at Rs. 2,500 annually under constitutional limits). This deduction is generally not available under the new regime.
7. Leave encashment - section 10(10AA)
Government employees may qualify for full exemption subject to statutory rules. For eligible non-government employees, the notified lifetime monetary ceiling is Rs. 25 lakh for relevant retirements from 1 April 2023, subject to the least-of statutory calculations and prior exemption usage; the former Rs. 3 lakh ceiling is outdated.
8. Salary arrears and advance salary - section 89(1)
Relief can reduce extra tax caused by bunching arrears or advance salary in one year. Compute the comparison under Rule 21A and furnish Form 10E before claiming relief in the return.
9. Voluntary retirement compensation - section 10(10C)
Qualifying voluntary retirement or separation compensation may be exempt up to Rs. 5 lakh subject to Rule 2BA and other conditions. Relief under section 89 cannot be duplicated for the same eligible compensation.
10. Pension and commutation - section 10(10A)
Uncommuted pension is normally taxable as salary or family pension as applicable. Commuted pension is fully exempt for specified government employees and partially exempt for qualifying other employees, depending on gratuity and statutory formulae.
11. Gratuity - section 10(10)
Qualifying government gratuity can be fully exempt. For covered non-government employees, the notified ceiling is Rs. 20 lakh, subject to actual receipt and statutory salary/service formulae, and prior exempt gratuity; the old Rs. 10 lakh ceiling is outdated.
12. Home loan interest - section 24(b)
Under the old regime, eligible interest on a self-occupied home may be deductible up to Rs. 2 lakh when construction/acquisition conditions are met; Rs. 30,000 may apply otherwise. Pre-construction interest is generally spread over five years. Under the new regime, the self-occupied section 24(b) deduction is unavailable, and house-property loss cannot be set off against other heads.
13. Tax-saving investments - section 80C
Eligible life insurance premiums, EPF/PPF, ELSS, NSC, qualifying tuition fees, home-loan principal and specified deposits share the combined Rs. 1,50,000 ceiling. Check lock-ins, ownership and payment conditions; normally old regime only.
14. Pension annuity contributions - section 80CCC
Eligible contributions to prescribed pension annuity plans of insurers are within the shared Rs. 1,50,000 ceiling under section 80CCE. Withdrawal or surrender may be taxable as prescribed.
15. Own NPS contribution - section 80CCD(1)
Subject to the combined Rs. 1,50,000 ceiling, qualifying own NPS contributions are generally limited to 10% of salary for employees and 20% of gross total income for self-employed persons. These own-contribution deductions are generally old-regime benefits.
16. Additional NPS and employer NPS - sections 80CCD(1B) and 80CCD(2)
Under the old regime, an additional deduction up to Rs. 50,000 for qualifying own NPS contributions is available under section 80CCD(1B), including eligible NPS Vatsalya contributions subject to law. Employer NPS contribution under section 80CCD(2) can be deducted separately: up to 14% of qualifying salary for government employees and, under the new regime, up to 14% for other employees (generally 10% under old regime). Overall employer-contribution perquisite rules may also apply.
17. Savings interest - sections 80TTA and 80TTB
Old-regime section 80TTA generally allows up to Rs. 10,000 of eligible savings-account interest for individuals other than resident senior citizens and HUFs. Section 80TTB may allow resident senior citizens up to Rs. 50,000 of eligible deposit interest. Neither is generally available under the new regime.
18. Rent without HRA - section 80GG
Under the old regime, qualifying taxpayers not receiving HRA can deduct the least of rent minus 10% of adjusted total income, Rs. 5,000 per month, or 25% of adjusted total income. Ownership restrictions apply and Form 10BA is required.
19. Education loan interest - section 80E
Interest actually paid on a qualifying higher-education loan can be deducted for up to eight assessment years or until the interest is paid, whichever is earlier. Principal is not deductible under this section; generally old regime only.
20. Health insurance - section 80D
Under the old regime, qualifying health insurance and specified preventive check-ups may be deductible up to Rs. 25,000 for self/family plus Rs. 25,000 for parents; limits rise to Rs. 50,000 for each eligible senior-citizen group. Preventive check-ups have a Rs. 5,000 sub-limit within the overall ceiling. Conditions apply to senior-citizen medical expenditure.
21. Dependent with disability - section 80DD
For eligible resident individuals or HUFs maintaining a dependent with certified disability, the fixed old-regime deduction is Rs. 75,000 (40% or more disability) or Rs. 1,25,000 (severe disability of 80% or more), subject to specified conditions and certification.
22. Specified disease treatment - section 80DDB
Eligible resident taxpayers may deduct qualifying treatment expenditure for prescribed diseases, up to Rs. 40,000 or Rs. 1,00,000 for a senior citizen, subject to actual eligible expenditure, insurance reimbursement adjustment and Rule 11DD documentation.
23. Taxpayer with disability - section 80U
A resident individual with qualifying certified disability may claim a fixed old-regime deduction of Rs. 75,000, or Rs. 1,25,000 for severe disability, subject to statutory documentation.
24. Charitable donations - section 80G
Eligible donations to approved funds and institutions may qualify for 50% or 100% deduction, with or without an adjusted-income ceiling depending on recipient. Cash donations exceeding Rs. 2,000 do not qualify. Obtain the prescribed donation certificate and verify recipient eligibility.
25. Company political contributions - section 80GGB
Qualifying Indian companies may claim deduction for eligible non-cash contributions to registered political parties or electoral trusts, subject to company-law restrictions and documentation. Applicable regime restrictions must be checked.
26. Other political contributions - section 80GGC
Qualifying non-cash contributions by eligible non-company taxpayers to registered political parties or electoral trusts may be deductible under the old regime, subject to the law and documentation. Cash contributions are excluded.
27. Patent royalty - section 80RRB
Eligible resident individual patentees may claim up to Rs. 3 lakh of qualifying patent royalty income, or actual qualifying royalty if lower, subject to registration, certification, filing and other conditions. Generally unavailable under the new regime.
Tax saving for professionals and business owners
Professionals and business owners may also deduct legitimate business expenditure under applicable law, maintain depreciation schedules, and consider eligible presumptive taxation under sections 44AD, 44ADA or 44AE, subject to turnover, receipt, profession and other conditions. Presumptive taxation is a method of income computation, not a blanket exemption. Tax audit, TDS, GST, advance tax and documentation obligations should be considered separately. A business taxpayer's regime-selection rules can be more restrictive than those for salaried taxpayers.
Official legal and tax references
- Income Tax Department - Salaried individuals, AY 2026-27
- Income Tax Department - Deductions allowable to taxpayers
- Income Tax Department - Salary deductions and allowances
- Income Tax Department - Chapter VI-A deductions
- Income Tax Department - Income-tax Act, 2025 FAQs
- India Code - Official legislation repository
Disclaimer: This is a general guide, not personalised tax advice. Tax savings vary by tax year, taxpayer category, regime, documentary proof, special-rate income and legislative amendments. Check official law and the applicable return instructions before filing.