How to Save Income Tax for FY 2025-26 (AY 2026-27)
Welcome to Our Blog – How to Save Income Tax for FY 2025-26 (AY 2026-27). If you are a salaried employee, paying less tax is possible with smart planning. Every year, many people pay extra tax because they don’t know about deductions and exemptions. The Old Tax Regime lets you save through investments and expenses like PPF, ELSS, LIC, health insurance, rent, home loan, and NPS. The New Tax Regime has lower tax rates but fewer deductions. If you already invest or pay rent/loans, the Old Regime may be better, otherwise the New Regime is simpler. By starting investments early, submitting Form 12BB to your employer, and checking which regime suits you, you can save tax and keep more money in your pocket while also planning for your future.
Our expert team is always here to help you choose the best tax-saving options and guide you step by step. Feel free to reach out to us anytime for personalized advice.
Old Regime vs New Regime – Which One Saves More Tax?
Salaried Employees Can Save Income Tax – FY 2025-26 (AY 2026-27) Choosing the right tax regime is an important step in saving tax for salaried employees. The government allows taxpayers to pick between the Old Regime and the New Regime. Understanding your income, investments, and expenses can help you decide which option will save you more money and keep your finances simple.
Old Regime vs New Regime:
Old Regime: Higher tax rates but allows multiple deductions such as 80C (PPF, ELSS, LIC, EPF, tuition fees), 80D (health insurance), HRA, home loan interest, and NPS.
New Regime: Lower tax rates but very limited deductions (mainly NPS and employer contribution).
Income Slabs and Tax Rates
Income Slab | Old Regime Tax Rate | New Regime Tax Rate |
|---|---|---|
Up to ₹3,00,000 | Nil | Nil |
₹3,00,001 – ₹6,00,000 | 5% | 5% |
₹6,00,001 – ₹9,00,000 | 20% | 10% |
₹9,00,001 – ₹12,00,000 | 20% | 15% |
₹12,00,001 – ₹15,00,000 | 30% | 20% |
Above ₹15,00,000 | 30% | 30% |
How to Choose the Best Option
If you already invest in PPF, ELSS, LIC, or pay home loan interest or rent, the Old Regime may save more.
If you have few investments or deductions, the New Regime is simpler and may be better.
Start your investments early and submit Form 12BB to your employer to claim deductions.
Compare both regimes using online tax calculators before filing your ITR to see which one benefits you most.
Save Tax with Section 80C – LIC, PPF, ELSS, PF Investments
Under Section 80C, you can save up to ₹1.5 lakh on your taxable income every year. There are many options to choose from, and picking the right ones can help you save tax while also growing your money. Some popular choices include:
LIC Premium – Protects your family and saves tax
Public Provident Fund (PPF) – Safe long-term savings
Employee Provident Fund (EPF) – Automatic tax-saving from salary
ELSS Mutual Funds – Short lock-in, potential for higher returns
Sukanya Samriddhi Yojana – For your girl child’s future
National Savings Certificate (NSC) – Safe and fixed returns
5-Year Tax Saving FD – Bank fixed deposits for tax saving
Tuition Fees for Children – Education expenses qualify
Home Loan Principal Repayment – Reduce taxable income while paying your loan
ULIP (Unit Linked Insurance Plan) – Insurance + investment
Senior Citizen Saving Scheme (SCSS) – For senior citizens
Post Office Savings Schemes – Safe government-backed options
Table of 80C Investments
Investment Option | Lock-in Period | Risk | Tax Benefit |
|---|---|---|---|
PPF | 15 Years | Low | Up to ₹1.5L |
ELSS Mutual Fund | 3 Years | Moderate/High | Up to ₹1.5L |
Tax Saving FD | 5 Years | Low | Up to ₹1.5L |
Life Insurance Premium | Depends on Policy | Low | Up to ₹1.5L |
NSC | 5 Years | Low | Up to ₹1.5L |
Key Documents Required for Filing a Tax Audit
Proper documentation is essential for a smooth and error-free tax audit. Below is a basic checklist for businesses and professionals:
For Businesses:
Books of accounts (ledger, journal, cash book)
Bank statements and reconciliation reports
Sales and purchase invoices
Fixed asset register and depreciation details
Loan and liability statements
Income and expense proofs
For Professionals (Doctors, Lawyers, Consultants, etc.):
Receipts of professional fees
Bank statements and cash receipts
Expenses related to profession (rent, utilities, travel)
Investments or capital expenditure proofs
Due Dates for Filing Tax Audit Reports
Filing your tax audit report on time is very important to stay compliant with the Income Tax laws and avoid penalties or interest. For FY 2024-25 (AY 2025-26), the due date for submitting the tax audit report under Section 44AB is:
🗓 30th September 2025 – Applicable for taxpayers whose accounts are required to be audited.
Key Points to Remember:
Timely filing avoids penalties: Submitting your tax audit report on time ensures you remain compliant and do not incur late fees or interest.
Mandatory even if no tax liability: Even if your business or profession shows no tax payable, filing the audit report is required if your turnover or income exceeds the limits specified under Section 44AB.
Do not rely on extensions: The Income Tax Department may sometimes allow a short grace period for technical issues, but relying on this is risky and can attract penalties if delayed.
Penalty and Consequences for Not Conducting Audit
If a taxpayer crosses the prescribed turnover or receipt limits but fails to conduct a tax audit, there can be serious consequences under the Income Tax Act.
1. Penalty under Section 271B
A penalty of 0.5% of turnover or gross receipts is levied for each year of default.
The maximum penalty can be equal to the total turnover or gross receipts.
2. Disallowance of Expenses
The Income Tax Department may disallow certain business expenses, which increases your taxable income and consequently the tax liability.
3. Interest and Legal Security
Delayed filing of tax audit reports attracts interest under Sections 234A, 234B, and 234C.
Non-compliance may also trigger further scrutiny or notices from the Income Tax Department.
Tax Planning Tips for the Whole Financial Year
- Start investing early – This helps you maximize deductions and grow your savings over time.
- Use a mix of investments – Combine PPF, ELSS, and Insurance for a balanced approach of tax saving, safety, and growth.
- Keep receipts and proofs organized – Maintain all documents for investments, insurance, loans, and donations for easy ITR filing.
- Track eligible expenses – Keep a record of expenses under Section 80D, 80G, and other deductions.
- Check Old vs New Regime – Compare both tax regimes at the start of the year to choose the one that saves you more.
- Review investments quarterly – Make sure your contributions to PPF, ELSS, or insurance are on track to claim full deductions.
- Plan home loan payments – Adjust EMI and principal repayment timing to maximize tax benefits under Sections 24b and 80C.
- Claim all eligible deductions – Don’t forget tuition fees, medical check-ups, NPS contributions, and donations.
- Use online calculators – Quick online tools help you estimate tax and plan investments efficiently.
- Consult a tax expert if needed – Professional guidance can ensure you don’t miss any deductions or tax-saving opportunities.
Common Mistakes to Avoid While Claiming Deductions
- Not submitting receipts or proofs on time – Without proper documentation, your employer or the tax department may reject your claims.
- Ignoring small deductions – Even minor expenses like preventive health check-ups or tuition fees can help reduce your taxable income.
- Confusing principal repayment with interest on home loans – Interest is claimed under Section 24b, while principal repayment falls under Section 80C. Mixing them up can lead to incorrect claims.
- Choosing the wrong tax regime without calculation – Many employees stick to a regime without comparing Old vs New, which can result in paying higher taxes.
- Overlooking deductions for parents or senior citizens – Sections like 80D for parents are often missed, especially for senior citizen parents.
- Missing deadlines for tax-saving investments – Investing at the last minute may lead to incomplete deductions.
- Not keeping track of donations – Donations under Section 80G require proper receipts; missing these can reduce your eligible deduction.
- Ignoring NPS or other eligible contributions – Extra contributions to NPS under 80CCD(1B) give additional deductions but are often overlooked.
- Failing to plan quarterly – Waiting until the end of the year to claim deductions can lead to missed opportunities or rushed investments.
- Not consulting a tax expert when needed – Complex cases like multiple home loans, high-value donations, or foreign income may require professional guidance to maximize deductions.
How Experts Can Help You Reduce Your Tax Liability
Managing taxes can be confusing with multiple sections, deductions, and investment options. Getting professional guidance from experienced CAs and tax advisors can ensure you save the maximum legally while avoiding mistakes.
Here’s how experts can help you:
- Choose the Most Beneficial Tax Regime
- Professionals analyze your income, expenses, and investments to determine whether the Old Tax Regime with deductions or the New Tax Regime without most deductions is more advantageous for you.
- Maximize Deductions and Investments
- Experts guide you on claiming all eligible deductions under Sections 80C, 80D, 80E, 80G, and others, ensuring nothing is missed.
- They also suggest the right mix of investments like PPF, ELSS, NSC, life insurance, and health insurance to save tax effectively.
- Optimize Loans and Insurance for Tax Benefits
- Tax advisors help structure home loans, education loans, and insurance premiums to reduce taxable income and gain maximum benefits.
- Ensure Accurate Filing and Compliance
- Professionals handle documentation, proofs, and tax filing, minimizing errors and avoiding penalties from incorrect claims.
- Year-Round Tax Planning
- Tax-saving isn’t just about end-of-year investments. Experts provide continuous guidance, helping you plan every month to maximize benefits and maintain organized finances.
Benefits of Professional Guidance:
- Legally maximize tax savings
- Save time and avoid stress
- Personalized solutions based on your income and investments
- Ensure full compliance with income tax laws
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🌐 Website: www.itradda.com
