How to Save Tax on Salary, Honestly

This trips up more people than any rule. Investing ₹1,50,000 under section 80C does not save you ₹1,50,000. It reduces your taxable income by that much, so the tax you save is ₹1,50,000 multiplied by your marginal rate.

At a 30% marginal rate that is ₹45,000, plus cess. At 20% it is ₹30,000. At 5% it is ₹7,500 — and at that point you are locking away ₹1.5 lakh for five years to save less than the money would earn in a decent deposit.

Nothing else can be decided until this is. The new regime has wider slabs and almost no deductions; the old regime has narrower slabs and a long list of them.

Run your real numbers through both. Broadly, the old regime tends to win when your combined deductions are large relative to income — typically because you pay substantial rent in a metro on a high basic salary, or you are repaying a home loan on a self-occupied property. Without those two, the new regime usually wins even with a full 80C claim.

The list is short, which is the point of the regime. Do not spend energy chasing deductions that no longer apply.

• The standard deduction applies automatically to salary and pension income. Nothing to do.
• Section 80CCD(2) — your employer’s contribution to NPS — remains deductible. If your employer offers it as part of the salary structure, this is frequently the only meaningful lever you have. The trade-off is that NPS is locked until retirement and at least 40% must eventually buy an annuity.
• Structuring reimbursements correctly still helps, since genuine reimbursements against actual bills are not salary in the first place.
• That is essentially it. 80C, 80D, 80CCD(1B) and HRA exemption do not apply.

Work down this list rather than starting with 80C, which is where most people start and where the smallest amounts usually are.

• Claiming HRA without paying rent. Rent above the annual threshold requires the landlord’s PAN, and fabricated rent receipts are a straightforward misstatement.
• Claiming both HRA and self-occupied home loan interest while living in the property you own. There are genuine situations where both apply — owning in one city and renting in another for work — but they have to be real.
• Buying an insurance policy as an investment because it carries a deduction. The deduction is real; the returns usually are not competitive.
• Last-week-of-March decisions. Every year people buy a product they do not want because the deadline arrived. Decide in April, not March.