With the new tax regime now the default for most taxpayers, the landscape for tax saving has changed significantly. Yet there remain substantial legitimate avenues to reduce your tax liability - whether you are salaried, a freelancer, or a business owner. This guide covers the most effective strategies for FY 2025-26.
Step 1: Choose the Right Tax Regime
Income Level | Likely Better Regime |
|---|---|
Below INR 7.75 lakh (after standard deduction) | New regime - zero tax with rebate |
INR 7.75 lakh to INR 15 lakh with significant deductions | Old regime often better |
Above INR 15 lakh with limited deductions | New regime likely better |
Above INR 15 lakh with HRA plus 80C plus home loan | Calculate both - old regime may win |
Declare your regime choice to your employer at the start of the financial year. Run a proper calculation with a CA before deciding.
For Salaried Employees: Old Regime Deductions
Section 80C: INR 1.5 Lakh Limit
EPF employee contribution (auto-deducted from salary)
PPF contributions (INR 500 to INR 1.5 lakh per year, 7.1% interest, tax-free)
ELSS mutual funds (3-year lock-in, market-linked, most flexible 80C option)
Life insurance premium on policies in your name, spouse, or children
Home loan principal repayment
NSC, 5-year tax-saving FD, Sukanya Samriddhi Yojana
Section 80D: Health Insurance
INR 25,000 deduction for health insurance for self, spouse, and children. Additional INR 25,000 (or INR 50,000 if parents are senior citizens) for parents health insurance. Total deduction up to INR 75,000 per year.
HRA Exemption
HRA exemption is the least of: actual HRA received, rent paid minus 10% of salary, or 50% of salary (40% for non-metro cities). Maintain rent receipts and collect landlord PAN if annual rent exceeds INR 1 lakh.
Home Loan Interest Under Section 24(b)
Interest on home loan for self-occupied property is deductible up to INR 2 lakh per year under the old regime. For let-out property, full interest is deductible without limit.
For Freelancers and Business Owners
Presumptive Taxation
Professionals can declare 50% of receipts as profit under 44ADA (turnover up to INR 75 lakh). Businesses can declare 6-8% of turnover as profit under 44AD (turnover up to INR 3 crore). This eliminates audit requirements and simplifies compliance significantly.
Business Expenses Deduction
All legitimate business expenses are deductible: home office costs, equipment depreciation, professional fees, software, travel, training, and insurance. Maintain proper documentation for every deduction claimed.
HUF as a Tax Planning Vehicle
A Hindu Undivided Family (HUF) is treated as a separate taxpayer with its own basic exemption and 80C limit. Family income such as rental income or ancestral property income can be channelled through an HUF, effectively splitting income across two taxpayers and doubling available deductions.
Common Tax Saving Mistakes to Avoid
Making 80C investments in March without planning throughout the year
Not claiming HRA exemption due to missing documentation
Choosing the wrong tax regime without calculation
Not declaring freelance income to employer
Missing advance tax instalments and paying interest
How PGA & Co. Can Help
At PGA & Co. Chartered Accountants, we provide personalised tax planning for salaried individuals, freelancers, and business owners: regime selection, deduction optimisation, HUF structuring, and ITR filing.
Contact: +91 86998-87200 | info@pgaca.in | pgaca.in/contact
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