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Pillar guide

Tax saving in India (FY 2025-26)

Last updated 2026 · 9-minute read · Educational, not tax advice

1. FY 2025-26 slabs at a glance

For FY 2025-26 (Assessment Year 2026-27), the New Regime is the default and applies these slabs to taxable income (after the ₹75,000 standard deduction):

  • 0 – ₹4 lakh — 0%
  • ₹4 – 8 lakh — 5%
  • ₹8 – 12 lakh — 10%
  • ₹12 – 16 lakh — 15%
  • ₹16 – 20 lakh — 20%
  • ₹20 – 24 lakh — 25%
  • Above ₹24 lakh — 30%

The Section 87A rebate makes tax zero for taxable income up to ₹12 lakh — meaning a salaried earner with ₹12.75 lakh gross income pays no tax in the New Regime. Above that, slab rates apply on the full taxable income, plus 4% cess and surcharge above ₹50 lakh.

The Old Regime still exists but is rarely the right choice unless your total deductions exceed roughly ₹4 lakh.

2. Old vs New — which one to pick

The right answer is salary- and deduction-dependent. Run both via our regime comparison calculator. As a rough heuristic:

  • Salary under ₹12 lakh → New Regime almost always wins (rebate).
  • Salary ₹12–15 lakh → New Regime usually wins unless 80C + 80D + HRA exceeds ₹3 lakh.
  • Salary ₹15–30 lakh → it's a close call; depends heavily on HRA and home loan.
  • Salary ₹30 lakh+ → New Regime usually wins unless you have a large home loan + HRA + 80C package.

3. Tax by salary band (FY 2025-26)

Pre-computed comparisons for common salary points (Old Regime assumes ₹50k standard + ₹1.5L 80C + ₹25k 80D = ₹2.25 lakh deductions; New Regime uses ₹75k standard only):

4. The 80C playbook (Old Regime only)

Section 80C lets you deduct up to ₹1.5 lakh from taxable income for specified investments and expenses. Available only in the Old Regime.

  • ELSS — equity tax-saver funds, 3-year lock-in, 12-13% expected return. The growth choice.
  • PPF — 7.1% tax-free, 15-year lock-in. The safe core.
  • EPF — your own contribution counts toward 80C automatically.
  • NSC — 7.7%, 5-year lock-in, fully taxable on maturity.
  • Life insurance premium — only if cover ≥ 10× annual premium.
  • Home loan principal — already-paid principal counts.
  • Children's tuition fees — up to 2 children, real bills only.

If you must rank-order: max out EPF first (employer matched), then ELSS for equity growth, then PPF for the safe tax-free base. Avoid traditional endowment LIC plans — they're insurance-and-investment hybrids that under-deliver on both.

5. 80D, NPS 80CCD(1B), and donations

Beyond 80C, the Old Regime offers several additional levers:

  • 80D health insurance — ₹25,000 for self+family, ₹50,000 if parents are seniors. Includes preventive health check-ups up to ₹5,000.
  • 80CCD(1B) NPS — extra ₹50,000 deduction over and above 80C, exclusively for NPS Tier-1 contributions. Best return-on-tax-benefit in the entire Old Regime.
  • 80E education loan interest — fully deductible, no cap, for up to 8 years.
  • 80G donations — 50% or 100% depending on the charity.

6. HRA optimisation

HRA exemption under Section 10(13A) is the largest individual deduction for most salaried tenants. The exempt portion is the lowest of:

  • Actual HRA received
  • 50% of basic salary (metro) or 40% (non-metro)
  • Rent paid minus 10% of basic salary

Use our HRA calculator to compute the exact number. Important: only Delhi, Mumbai, Kolkata, and Chennai count as metros — Bengaluru, Hyderabad, Pune all get 40%. HRA is one of the major deductions removed in the New Regime, which makes it a key tilt toward Old Regime for tenants with substantial rent.

7. Capital gains, post-2023 rules

Significant changes in recent budgets:

  • Equity LTCG — held over 12 months, taxed at 12.5% beyond ₹1.25 lakh per financial year.
  • Equity STCG — held under 12 months, taxed at 20%.
  • Debt mutual funds (bought after 1 April 2023) — all gains taxed at slab rate regardless of holding period. Indexation benefit is gone.
  • Real estate LTCG — 12.5% without indexation, or 20% with indexation (taxpayer's choice for properties bought before 23 July 2024).

8. Common tax-saving mistakes

1. Buying ULIPs or endowment plans only for 80C. You can do better with ELSS plus a separate term plan.

2. Filing under the wrong regime. Run both, file under the cheaper one.

3. Missing the 80CCD(1B) NPS extra ₹50k. The single highest tax-benefit-per-rupee deduction.

4. Not booking LTCG harvesting. The ₹1.25 lakh equity LTCG exemption resets every financial year — book gains, re-invest, reset cost basis.

9. Tools and next steps