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ArticleMost salaried people overpay tax not because they earn too much, but because they never claim what they're entitled to, or pick the wrong regime by default. Here are the moves that actually move the needle, biggest lever first.
Reviewed by CA Harika Chebolu, FCA · Last updated 2026-06-13
Quick answer
A plain-language guide to the deductions, exemptions and regime choices that actually cut a salaried person's tax — and the quiet mistakes that cost you money.
Before any investment, decide between the two regimes, because it decides which deductions even exist. The new regime charges nil tax up to Rs 12,00,000 of income and gives a Rs 75,000 standard deduction, but drops almost everything else — no 80C, HRA or home-loan interest. The old regime keeps all those deductions and a Rs 50,000 standard deduction, but taxes at higher rates and spares tax only up to Rs 5,00,000. If you claim a lot, old often wins; if you claim little, new usually does. Run both before you file — don't let your employer's default decide.
How your pay is split matters as much as how much it is. Components like HRA and certain reimbursements are taxed differently from plain "special allowance," so if your offer is flexible, structuring the eligible parts can lower taxable salary legitimately. This is mostly an old-regime advantage. Ask HR what's adjustable before the financial year locks in.
In the old regime, HRA exemption is the least of: actual HRA received, rent paid minus 10% of salary, and 50% of salary if you live in Delhi/Mumbai/Chennai/Kolkata (40% elsewhere). You can even pay rent to a parent who owns the home, as long as it's genuine — money actually transferred and the parent reports it as income. Keep a rent agreement and bank transfers, and remember that once annual rent crosses Rs 1,00,000 you must quote the landlord's PAN.
The standard deduction — Rs 75,000 in the new regime, Rs 50,000 in the old — applies to salary automatically, no investment needed. Leave-travel allowance can be claimed against actual travel within the rules, and some reimbursements built into your CTC and backed by bills aren't taxed the way allowances are. These cost you nothing to claim.
EPF already cut from your salary, PPF, ELSS, life-insurance premiums, five-year tax-saving deposits, home-loan principal and children's tuition all compete for the same Rs 1.5 lakh ceiling. Add up what's already happening before buying anything new, so you don't lock money into a poor product just for tax. 80C only helps in the old regime.
Health-insurance premiums are deductible up to Rs 25,000 for you and family, plus another Rs 50,000 for senior-citizen parents, under 80D. A voluntary NPS contribution gives an extra Rs 50,000 deduction under 80CCD(1B), over and above 80C. And interest on a home loan for a self-occupied house is deductible up to Rs 2,00,000, separate from the principal.
Section 80CCD(2) lets your employer contribute up to 14% of your salary (basic + DA) to NPS, and you get the deduction even under the new regime (it's 10% in the old). If your CTC can route part of your pay through employer-NPS, it cuts tax without changing take-home much. Most employees never ask HR whether it's available — do.
Tax-saving investments must be made within the financial year, not at filing time in July — last-week decisions are usually bad ones. And before filing, check that your Form 16, AIS and Form 26AS agree; mismatches are the most common trigger for a notice. Fix wrong AIS entries with feedback and keep proof of whatever you claim.
Decide this first; it drives everything else. The new regime has lower rates, a Rs 75,000 standard deduction and nil tax up to Rs 12,00,000, but drops most deductions; the old regime keeps deductions and a Rs 50,000 standard deduction at higher rates. With large claims the old regime can win; with few, the new usually does. Run both before filing.
Yes, if the arrangement is genuine. The parent must own the home, the rent must actually be paid (bank transfer), and they must report it as income. Keep a rent agreement and quote the landlord's PAN once annual rent crosses Rs 1,00,000.
Employer's NPS contribution under 80CCD(2). Your employer can put up to 14% of salary (basic + DA) into NPS and you get the deduction even in the new regime. Ask HR whether it's offered.
Have a specific salary structure or claim you're unsure about? Write to the firm and we'll look at your situation.