Tax Planning Guide for Salaried Employees in India 2025-26

Smart tax planning for salaried employees starts with the regime choice — and extends to optimising your salary structure, claiming all eligible deductions, and timing your investments correctly. For FY 2025-26 (AY 2026-27), the new tax regime with its higher rebate (zero tax up to ₹12 lakh) has made the regime comparison even more critical. Here is the complete tax planning guide for salaried employees.

Step 1 — Old vs New Regime: The Core Decision

Compare your total tax liability under both regimes:

• New Tax Regime benefits: Lower tax slabs, zero tax up to ₹12 lakh (₹12.75 lakh for salaried with standard deduction), no need for investments/documentation
• Old Tax Regime benefits: HRA exemption, 80C (₹1.5 lakh), 80D (₹25,000+), home loan interest (₹2 lakh), NPS (₹50,000 extra), LTA, professional tax — all deductions available
• If your deductions exceed approximately ₹3.75-4 lakh, old regime is typically better; otherwise new regime usually wins

Step 2 — Section 80C Investments (Old Regime)

• Maximum: ₹1.5 lakh per year — invest by March 31
• Options: EPF (already contributes from salary), PPF, ELSS (3-year lock-in), NSC, 5-year FD, LIC premium, home loan principal repayment, children's tuition fees
• ELSS offers the shortest lock-in (3 years) with market-linked returns

Step 3 — NPS: Additional ₹50,000 Deduction (Old Regime)

Section 80CCD(1B) allows an additional ₹50,000 deduction for NPS (National Pension System) contribution — over and above the ₹1.5 lakh 80C limit. For someone in the 30% tax bracket, this saves ₹15,600 in tax annually.

Step 4 — HRA Optimisation

If you pay rent, ensure your HRA exemption is correctly computed. If your employer does not give adequate HRA, consider requesting a salary restructuring — shifting a portion from "Special Allowance" to "HRA."

Step 5 — 80D Health Insurance

• Buy health insurance for yourself/family: up to ₹25,000 deduction
• Buy for parents: additional ₹25,000-₹50,000 depending on parents' age
• Maximum combined: up to ₹75,000 (or more for senior citizen parents)

Step 6 — Salary Structure Optimisation

Work with your employer's HR to restructure your CTC for maximum tax efficiency (mainly under old regime):

• Maximise HRA component (50% of basic for metro employees)
• Include phone/internet reimbursement (up to ₹2,400/month — fully exempt)
• Food vouchers/coupons: ₹50/meal × 2 meals × 26 days × 12 months = ₹31,200 exempt
• LTA component to utilise travel exemption
• NPS employer contribution: 10% of basic salary — exempt under Section 80CCD(2) in BOTH regimes

Conclusion

Salaried employee tax planning in 2025-26 revolves around the regime choice — and maximising the deductions that make the old regime worthwhile. SPOTON provides personalised tax planning and ITR filing services for employees across Kerala. Contact us for expert salary tax advisory services.