Most salaried Indians pay more tax than they legally have to. Why? Because they're not fully aware of the deductions and exemptions available under the Income Tax Act. This guide shows you how to reduce your tax bill legally — using government-approved investment and expense deductions.
All deductions below apply to the old tax regime only. If you're in the new tax regime (default from FY 2023-24), most of these deductions are not available.
Section 80C — The ₹1.5 Lakh Shield#
Section 80C allows you to deduct up to ₹1,50,000 from your taxable income by investing in approved instruments.
What counts towards 80C?#
| Investment / Payment | Eligible for 80C |
|---|---|
| Employee Provident Fund (EPF) | ✅ (automatically included) |
| Public Provident Fund (PPF) | ✅ Up to ₹1.5L |
| ELSS Mutual Funds | ✅ 3-year lock-in |
| Life Insurance Premium (LIC) | ✅ |
| NSC (National Savings Certificate) | ✅ |
| Sukanya Samriddhi Yojana | ✅ (for girl child) |
| Home Loan Principal Repayment | ✅ |
| Children's Tuition Fees | ✅ (2 children max) |
| SCSS (Senior Citizen Savings Scheme) | ✅ |
| 5-year Tax Saver FD | ✅ |
Best strategy: If your EPF already covers ₹50,000–₹80,000, top up with ELSS (best returns, 3-year lock-in) and PPF (tax-free returns, 15-year scheme).
Section 80D — Health Insurance Deduction#
Section 80D allows deductions for health insurance premiums paid for self, family, and parents.
| Coverage | Maximum Deduction |
|---|---|
| Self + spouse + children (below 60) | ₹25,000 |
| Self + spouse + children (60+ years) | ₹50,000 |
| Parents (below 60) | Additional ₹25,000 |
| Parents (60+ years — senior citizens) | Additional ₹50,000 |
Maximum total deduction: ₹1,00,000 (if both you and your parents are senior citizens)
Even if you pay health insurance in cash, the deduction is not allowed. Pay premiums via cheque, online transfer, or UPI.
Section 80CCD(1B) — Extra NPS Deduction#
The National Pension System (NPS) offers a special additional deduction of ₹50,000 under Section 80CCD(1B) — over and above the ₹1.5 lakh 80C limit.
This means if you maximize both 80C + NPS, you can deduct ₹2,00,000 from taxable income before considering other deductions.
HRA — House Rent Allowance Exemption#
If you're renting a home and receiving HRA as part of salary, a portion is exempt from tax. The exempt amount is the minimum of:
- Actual HRA received
- 50% of salary (metro cities) or 40% (non-metro cities)
- Actual rent paid minus 10% of salary
If your annual rent exceeds ₹1,00,000, the landlord's PAN is mandatory for claiming HRA exemption.
Section 80TTA / 80TTB — Interest Deduction#
- 80TTA (non-senior citizens): Deduction up to ₹10,000 on savings bank interest
- 80TTB (senior citizens 60+): Deduction up to ₹50,000 on all bank/post office interest
Home Loan Tax Benefits#
If you have a home loan, you get deductions from two sections:
| Component | Section | Maximum |
|---|---|---|
| Principal repayment | 80C | ₹1,50,000 |
| Interest on home loan (self-occupied) | 24(b) | ₹2,00,000 |
Other Useful Deductions#
| Section | What It Covers | Limit |
|---|---|---|
| 80E | Education loan interest | Full interest (8 years) |
| 80G | Donations to approved charities | 50–100% of donation |
| 80GG | Rent paid (if no HRA in salary) | ₹60,000/year |
| 80EEA | Home loan interest (affordable housing) | ₹1,50,000 |
Smart Tax-Saving Checklist#
Use this before filing your return:
- Maximized Section 80C (₹1.5 lakh)
- Invested in NPS for extra ₹50,000 deduction (80CCD-1B)
- Purchased health insurance for family and parents (80D)
- Claimed HRA if paying rent
- Claimed home loan interest under Section 24(b)
- Submitted investment proofs to employer before February
- Verified all TDS credits in Form 26AS
Frequently Asked Questions#
Can I invest in 80C after 31 March and still claim it? No. 80C investments must be made within the financial year (April to March). However, NPS and ELSS can be invested until 31 March and the same-day NAV/contribution applies.
Should I invest in ELSS or PPF? ELSS has higher returns (linked to equity markets) but carries risk. PPF offers guaranteed returns (~7.1%) with a 15-year lock-in. Best approach: Split between both.
What if I forgot to submit investment proofs to my employer? No problem — you can still claim all deductions when filing your ITR, even if your employer deducted extra TDS. The difference will come back as a refund.