As the financial year 2025-26 nears its end, it’s wise to review your financial decisions. Ensuring that all eligible investments and tax-saving contributions are made by March 31 allows investors to claim maximum deductions and benefits when filing taxes for the current fiscal year. This can help investors reduce their overall tax liability.
In India, there are many options under the tax laws that offer deductions and exemptions to reduce taxable income. These include investments in Equity-Linked Savings Scheme (ELSS), Public Provident Fund (PPF), National Pension System (NPS), life insurance premiums, health insurance, and tuition fees, among other things.
Opting for such investment measures can help investors save money while complying with legal requirements.
Deductions Under Section 80C
Under the tax laws, investing in ELSS or PPF can help claim deductions under Section 80C for investors. Investments made in fixed deposits can also be claimed under this section. The law allows investors to claim overall deductions of up to Rs 1.5 lakh under this section.
Section 80CCD
Under Section 80CCD(1), an employee can claim deductions up to Rs 1.5 lakh on their own NPS contributions, including basic salary and DA. Section 80CCD(1B) provides an extra Rs 50,000 deduction exclusively for NPS. Section 80CCD(2) allows tax benefits on contributions made by the employer to the employee’s NPS account.
Health Insurance Premiums
Investors in India can claim tax deductions on health insurance premiums under Section 80D. Individuals below 60 years can deduct up to Rs 25,000, while senior citizens can claim up to Rs 50,000. This includes premiums paid for self, spouse, children and parents, helping reduce taxable income.
Home Loan Interest
Under Section 24(b) of the Income Tax Act, investors can claim a deduction of up to Rs 2 lakh on annual home loan interest for a self-occupied property, with no limit for rented properties. Additionally, Section 80EEA allows first-time homebuyers who meet certain conditions to claim an extra deduction of up to Rs 1.5 lakh on home loan interest. The deductions for repayment of principal can be claimed under 80C.
Under Section 80G, donations to specified charitable institutions and funds are eligible for tax deductions.
To be clear, most of these tax deductions apply only under India’s old tax regime. The new regime offers limited benefits such as deductions on interest on home loans for let-out properties under Section 24(b), employer contributions to NPS and a standard deduction of Rs 75,000.
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