How can I save tax on my salary (legally)?

By the India Law Simplified editorial team · Verified against the bare Acts & official portals · Updated 2026-07-28 · ~4 min read

⚡ Quick answer

How much tax you can save depends on your regime. Under the old regime you can legally cut salary tax with HRA, the ₹1.5 lakh Section 80C limit (EPF, PPF, ELSS, life insurance, tuition), an extra ₹50,000 NPS under 80CCD(1B), health insurance under 80D, and ₹2 lakh of home-loan interest under Section 24(b). Under the new regime, deductions are mostly gone, but you get a ₹75,000 standard deduction, the ₹12 lakh rebate, and employer NPS under 80CCD(2). The first step is always to compute both regimes and pick the cheaper one.

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Every salaried person wants to keep more of their pay — legally. The good news is that Indian tax law offers several genuine, government-approved ways to reduce the tax on your salary. The catch is that they mostly live in the old regime, and which regime is better now depends on your numbers. This guide lays out every major tax-saver, how much each can save, and a simple order to use them — in plain language, with no jargon.

1Step 1: pick the right regime first

Before chasing deductions, decide your regime, because it changes everything. The new regime is the default and has no 80C, 80D or HRA — but lower rates and a ₹12 lakh rebate. The old regime has higher rates but lets you stack deductions.

If you pay significant rent (HRA) or have a home loan plus full investments, the old regime may win. If not, the new regime usually does. Run both through a calculator before locking in your investments for the year.

2Old-regime tax savers (the big levers)

If the old regime is better for you, these are the deductions to use, roughly in order of value:

HRA exemption (Section 10(13A)) — often the largest saver if you rent in a city
Section 80C — up to ₹1.5 lakh: EPF, PPF, ELSS, life insurance, 5-year FD, children's tuition, home-loan principal
Section 24(b) — up to ₹2 lakh of home-loan interest
Section 80CCD(1B) — an extra ₹50,000 for NPS, over and above 80C
Section 80D — ₹25,000 health insurance for self/family (₹50,000 if parents are seniors)
Standard deduction — ₹50,000, automatic, no proof needed

💡 ExampleNeha (old regime, ₹14 lakh salary, rents in Bengaluru) claims ₹2.4L HRA + ₹1.5L (80C) + ₹50,000 (NPS) + ₹25,000 (80D) + ₹50,000 standard deduction = ₹5.15 lakh of deductions, cutting her taxable income to ₹8.85 lakh and saving well over ₹1 lakh in tax versus claiming nothing.

3New-regime tax savers

The new regime removes most deductions, but it isn't deduction-free:

Standard deduction of ₹75,000 for salary (higher than the old regime's ₹50,000)
Employer's NPS contribution under Section 80CCD(2) — up to 14% of basic salary — is tax-free
The Section 87A rebate makes income up to ₹12 lakh tax-free

✅ TipOn the new regime, ask your employer to route part of your salary as an NPS employer contribution under 80CCD(2). It's the one major deduction that still works, and it's tax-free up to 14% of basic.

4Smart salary structuring

Beyond investments, how your CTC is structured affects tax (mainly in the old regime):

HRA component — claim exemption if you pay rent
Leave Travel Allowance (LTA) — exempt for travel within India, twice in a 4-year block
Meal/food allowance, telephone and internet reimbursements
NPS employer contribution (works in both regimes)

Key takeaways

Decide your regime first — it determines which deductions you can even use.
Old regime's biggest savers: HRA, 80C (₹1.5L), home-loan interest (₹2L), NPS 80CCD(1B) (₹50k), 80D.
New regime keeps a ₹75,000 standard deduction, the ₹12 lakh rebate and employer NPS (80CCD(2)).
Employer NPS under 80CCD(2) is the one big deduction that works in both regimes.
Always compute both regimes with a calculator before committing your year's investments.

Frequently asked questions

Which tax-saving option is best for salaried employees?

On the old regime, HRA (if you rent) plus ELSS/PPF (80C), NPS (80CCD(1B)) and health insurance (80D) is a strong, liquid combination. On the new regime, ask your employer to route NPS under 80CCD(2) — it's the main deduction that survives.

Can I save tax in the new regime at all?

Yes, but less. You get a ₹75,000 standard deduction, the ₹12 lakh rebate (zero tax up to ₹12 lakh), and tax-free employer NPS under 80CCD(2). Most personal investments like 80C and HRA, though, only work in the old regime.

Is ELSS or PPF better for 80C?

ELSS has the shortest lock-in (3 years) and market-linked, potentially higher returns; PPF has a 15-year lock-in but guaranteed, tax-free returns. ELSS suits growth and liquidity; PPF suits safety. Both count toward the ₹1.5 lakh 80C limit.

How much tax can a salaried person save?

It depends on income and regime. In the old regime, fully using HRA, 80C, NPS, 80D and home-loan interest can legally cut taxable income by ₹4–6 lakh, saving tens of thousands to over a lakh in tax. Use a calculator to see your exact number.