How to Save Income Tax for FY 2026-27

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How to Save Income Tax for FY 2026-27

  • By Web Online CA
  • 5 min read
  • Updated On 07-February-2026

Paying income tax is a legal responsibility for every citizen, but it does not mean you should pay more than you are required to. The Income Tax Act 1961 allows taxpayers to reduce their tax liability through careful financial planning, wise investments, and claiming eligible deductions. Whether you earn a salary, work independently, or run a business, proper planning can help you save a significant amount on your taxes.

Understanding Your Taxable Income

Before you start looking for ways to save taxes, it is important to understand what counts as taxable income. Your total income includes salary, income from business or profession, rental income, capital gains, and income from other sources like interest and dividends. Once your total income is calculated, applicable deductions can be applied to reduce the taxable amount.

Common Deductions to Reduce Your Tax Liability

Section 80C Investments

One of the most widely used tax-saving provisions is Section 80C. Investments under this section include:

  • Public Provident Fund (PPF)

  • Employees’ Provident Fund (EPF)

  • Equity Linked Savings Schemes (ELSS)

  • National Savings Certificates (NSC)

  • Life Insurance Premiums

The total deduction under Section 80C is capped at ₹1,50,000. By investing strategically, you can lower your taxable income significantly while also securing long-term financial growth.

Section 80CCD: National Pension Scheme (NPS)

Contributions to the National Pension Scheme are eligible for additional tax deduction under Section 80CCD. You can claim up to ₹50,000 over and above the 80C limit. Investing in NPS not only provides tax benefits but also ensures financial security after retirement.

Section 80D: Health Insurance Premiums

Health insurance premiums paid for yourself, family members, and parents can be claimed as deductions under Section 80D. The maximum deduction is ₹25,000 for adults and ₹50,000 if the insured person is a senior citizen. This includes premiums for health insurance policies and preventive health checkups.

Section 80E: Education Loan Interest

Interest paid on education loans for higher studies is eligible for deduction under Section 80E. There is no upper limit for this deduction, and it is available for a maximum of eight years or until the interest is paid, whichever is earlier. This deduction applies for loans taken for yourself, spouse, or children.

Section 24: Home Loan Interest

Homeowners can claim deductions on the interest paid on home loans under Section 24. The maximum limit for a self-occupied property is ₹2,00,000 per year. This helps reduce taxable income while making homeownership more affordable.

Section 10(13A): House Rent Allowance

If you live in a rented house and receive HRA as part of your salary, you can claim an exemption on the rent paid under Section 10(13A). To claim this, rent receipts and details of the landlord are required.

Section 80G: Donations to Charitable Organizations

Donations to eligible charitable organizations allow you to claim deductions under Section 80G. Depending on the organization, you may get a 50% or 100% deduction. Keep the donation receipts safely as proof for filing.

Section 80TTA and 80TTB: Savings Account Interest

Interest earned on savings accounts is also eligible for deduction. Non-senior citizens can claim up to ₹10,000 under Section 80TTA, while senior citizens can claim up to ₹50,000 under Section 80TTB. This is particularly useful if you have multiple savings accounts.

Smart Planning for Maximum Tax Savings

  • Invest early in the financial year: This allows your investments to grow and helps you claim deductions sooner.

  • Keep proof of all investments and expenses: Life insurance, PPF, ELSS, health insurance, home loan statements, and rent receipts must be organized for reference.

  • Plan around exemptions and allowances: Salaried individuals should review HRA, leave travel allowance, and other allowances to maximize benefits.

  • Combine deductions strategically: Using multiple sections such as 80C, 80CCD, and 80D together can result in significant tax savings.

Frequently Asked Questions

Under Section 80C, you can claim a maximum deduction of ₹1,50,000 for investments like PPF, ELSS, NSC, EPF, and life insurance premiums.

Yes. Under Section 80CCD(1B), you can claim an additional deduction of ₹50,000 for contributions to the National Pension Scheme, over and above the 80C limit.

Yes. Under Section 80D, premiums paid for yourself, family members, and parents are eligible. The deduction limit is ₹25,000 for adults and ₹50,000 if the insured person is a senior citizen.

Yes. Donations to eligible charitable organizations are deductible under Section 80G. Depending on the organization, you can claim either 50% or 100% of the donation amount.

Yes. Under Section 80TTA, non-senior citizens can claim up to ₹10,000 on savings account interest, while senior citizens can claim up to ₹50,000 under Section 80TTB.
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