Tax Saving Tips: Best Ways to Reduce Tax Under the Old Tax Regime (FY 2025–26) 

As we head towards the last quarter of FY 2025–26, salaried individuals should start reviewing their tax planning strategy carefully. One of the most crucial decisions during this period is selecting between the old tax regime and the new tax regime. 

While the new tax regime provides reduced tax rates and tax-free income up to ₹12 lakh, it removes most exemptions and deductions. Due to this limitation, a large number of salaried employees continue to choose the old tax regime, which offers multiple legal avenues to reduce taxable income. 

With digital payroll platforms like Zlendo Suite, employees can conveniently manage salary structures, submit investment proofs, and ensure correct tax computation through a unified HR and payroll system. 

If you have opted for the old tax regime, the following sections explain the most effective ways to lower your tax liability legally. 

Salary-Based Tax Exemptions 

Under the old tax regime, certain components of salary are either exempt or deductible, helping reduce overall taxable income. 

Standard Deduction (Section 16) 

All salaried individuals and pensioners are eligible for a standard deduction of ₹50,000, which is automatically reduced from taxable salary income. 

House Rent Allowance – HRA (Section 10(13A)) 

For employees living in rented accommodation, HRA exemption is calculated as the lowest of the following: 

• Actual HRA received 

• Rent paid minus 10% of salary 

• 50% of salary for metro cities or 40% for non-metro cities 

Other Salary Allowances 

The old tax regime also allows exemptions or deductions for the following: 

• Leave Travel Allowance (LTA) 

• Professional Tax 

• Entertainment Allowance (for eligible employees) 

• Conveyance allowance for specially-abled individuals 

Home Loan Tax Benefits 

Home Loan Interest (Section 24(b)) 

Taxpayers can claim a deduction of up to ₹2 lakh per year on interest paid for a self-occupied house property. 
For let-out properties, the entire interest amount is deductible, subject to overall loss adjustment limits. 

Home Loan Principal Repayment (Section 80C) 

The principal portion repaid on a home loan qualifies for deduction under Section 80C, within the overall limit of ₹1.5 lakh. 

Chapter VI-A Deductions (Major Tax-Saving Sections) 

Section 80C – Investments & Payments (Up to ₹1.5 Lakh) 

Eligible investments and expenses under this section include: 

• Employee Provident Fund (EPF) 

• Public Provident Fund (PPF) 

• Life insurance premiums 

• ELSS mutual funds 

• 5-year tax-saving fixed deposits 

• National Savings Certificate (NSC) 

• Sukanya Samriddhi Yojana (SSY) 

• Tuition fees for up to two children 

• Home loan principal repayment 

National Pension System – NPS (Section 80CCD) 

• 80CCD(1): Employee contribution (part of ₹1.5 lakh under Section 80C) 

• 80CCD(1B): Additional deduction of ₹50,000 

• 80CCD(2): Employer contribution up to 10–14% of salary, fully exempt 

Health Insurance (Section 80D) 

• ₹25,000 for self, spouse, and dependent children 

• An extra deduction of ₹25,000 is available for parents, which increases to ₹50,000 if they qualify as senior citizens. 

• Preventive health check-ups allowed up to ₹5,000 

Education Loan Interest (Section 80E) 

Interest paid on education loans for higher studies is fully deductible for up to 8 consecutive years, with no upper limit. 

Savings Account Interest 

• Section 80TTA: Deduction up to ₹10,000 (non-senior citizens) 

• Section 80TTB: Deduction up to ₹50,000 (senior citizens) 

Donations (Section 80G) 

Contributions made to approved charitable institutions are eligible for 50% or 100% deduction, subject to applicable limits and conditions. 

Disability & Medical Treatment Benefits 

• Section 80DD: ₹75,000 to ₹1,25,000 for dependent with disability 

• Section 80DDB: ₹40,000 to ₹1,00,000 for specified medical treatments 

• Section 80U: ₹75,000 to ₹1,25,000 for self-disability 

Rent Paid Without HRA (Section 80GG) 

If an employee does not receive HRA, deduction is available based on the lowest of: 

• ₹5,000 per month (₹60,000 annually) 

• 25% of total income 

• Rent paid minus 10% of total income 

(Form 10BA submission is mandatory) 

Other Important Deductions 

• Section 80CCC: Pension or annuity plan contributions 

• Section 80CCH: Agnipath Corpus contributions 

• Section 80EE / 80EEA: Additional interest deduction for first-time or affordable home buyers 

Summary Table: Old Tax Regime Deductions (FY 2025–26) 

Old vs New Tax Slab Rates (Applicable from 1 April 2026) 

Closing Note 

When used strategically, the old tax regime provides extensive opportunities to reduce tax liability. By combining salary exemptions, investments, insurance coverage, and loan-related deductions, employees can optimize their tax savings effectively. 

An integrated HR and payroll platform like Zlendo Suite simplifies investment declarations, payroll compliance, and tax calculations—making tax planning seamless for both employees and organizations.