Easy Tips for Salaried Employees to Reduce Their Taxes

Whether you’re saving for a solo trip, building your emergency fund, or investing in your child’s education, smart tax planning tips for salaried employees can help you keep more of your money.

Let’s break it down in simple terms 

What is Tax Planning?

Tax planning means organising your income, savings, and expenses smartly so you pay less tax—but in a legal and structured way. It’s not just about saving money, but also about maximising benefits that the Income Tax Act already gives you.

For salaried women in India, tax planning tips for salaried employees aren’t just smart—they’re essential.

Understanding Income Tax Slabs for FY 2025-26

Choosing the right tax regime is your first and most important tax-saving decision.

New Tax Regime (Default)

Annual Income (₹)	Tax Rate
Up to ₹4,00,000	Nil
₹4,00,001 – ₹8,00,000	5%
₹8,00,001 – ₹12,00,000	10%
₹12,00,001 – ₹16,00,000	15%
₹16,00,001 – ₹20,00,000	20%
₹20,00,001 – ₹24,00,000	25%
Above ₹24,00,000	30%

Key Highlights:

• Standard Deduction: ₹75,000 for salaried individuals.
  
• Rebate under Section 87A: Up to ₹60,000 for incomes up to ₹12,00,000, effectively making income up to ₹12,75,000 tax-free when combined with the standard deduction.

Old Tax Regime

Annual Income (₹)	Tax Rate
Up to ₹2,50,000	Nil
₹2,50,001 – ₹5,00,000	5%
₹5,00,001 – ₹10,00,000	20%
Above ₹10,00,000	30%

Key Highlights:

• Standard Deduction: ₹50,000 for salaried individuals.
  
• Rebate under Section 87A: Up to ₹12,500 for incomes up to ₹5,00,000.

Deductions and Exemptions – What You Can Claim

Here’s a comparison of popular tax deductions and their availability under the Old and New regimes:

 Dedication Availability Table

Deduction/Exemption	Old Regime	New Regime
Standard Deduction (Salaried/Pensioners)	₹50,000	₹75,000
Section 80C (EPF, PPF, ELSS, LIC, etc.)	✅	❌
Section 80D (Health Insurance)	✅	❌
House Rent Allowance (HRA)	✅	❌
Section 80E (Education Loan Interest)	✅	❌
Section 80GG (Rent Paid, No HRA)	✅	❌
Leave Travel Allowance (LTA)	✅	❌
NPS (Section 80CCD(1B)) – Additional ₹50,000	✅	❌
Reimbursements (Food, Phone, Uniform, etc.)	✅	❌

Clearly, if you’re claiming multiple deductions, the old regime is often more beneficial.

Top Tax Saving Tips for Salaried Employees

1. Use Section 80C to Its Fullest

Invest up to ₹1.5 lakh in these most common options.:

• EPF
  
• Public Provident Fund (PPF)
  
• ELSS (Equity-linked mutual funds)
  
• Life Insurance Premium
  
• Home Loan Principal
  

Lxme Tip: ELSS offers the dual benefit of tax-saving strategies for taxpayers and high growth potential. You can check out the Lxme app, which offers investment plans for women. You can check out the Lxme Tax Saving Portfolio, an ELSS fund that is well-researched and curated by experts.

2. Buy Health Insurance – Section 80D

Claim deductions for premiums paid:

• Self, Spouse & Children: Up to ₹25,000
  
• Parents (under 60): ₹25,000
  
• Parents (above 60): ₹50,000
  
• Preventive Health Check-up: ₹5,000 (included)
  

3. Claim House Rent with HRA

If you live in rented accommodation, you can claim HRA exemption under Section 10(13A). Formula:

• Actual HRA received
  
• 50% of basic salary (metro) / 40% (non-metro)
  
• Rent paid – 10% of salary
  

Whichever is least is exempt.

For employees not receiving HRA, deductions under Section 80GG are available.

4. Use Education Loan Wisely – Section 80E

Repaying a study loan? You can claim full deduction on the interest for up to 8 years.

5. Retirement Planning with NPS

Use Section 80CCD:

• ₹1.5 lakh under 80C
  
• Extra ₹50,000 under 80CCD(1B)
  

Perfect for long-term savings with tax benefits.

6. Claim LTA (Leave Travel Allowance)

Travel within India? Expenses for tickets (train/flight) can be claimed for two trips in a 4-year block. The exemption covers travel by rail, air, or public transport.

What’s New in FY 2025-26?

• Section 87A Rebate (New Regime): As mentioned earlier, you can now claim a rebate up to ₹60,000 if your total income is up to ₹12,00,000—effectively making income up to ₹12,75,000 tax-free (when combined with the standard deduction).

• New Regime is the Default: If you prefer the old tax regime with deductions like 80C and 80D, you must opt out for it while filing your return.

Which Regime is Better for You?

Ask yourself:

• Are you claiming multiple deductions under 80C, 80D, HRA, etc.?
• Don’t want to track investments and deductions?

Use an Income Tax Calculator to estimate both options before filing.

Simply, Claiming many deductions? The old regime may still be better.

Prefer a hassle-free process without tracking investments? The new regime could be more convenient.

But don’t decide blindly—compare both options before filing!

Pro Tip: File Your ITR on Time

Timely filing helps you:

• Avoid late fees (₹1,000–₹5,000)
  
• Claim refunds faster
  
• Maintain a clean financial record (important for loans and visas)

Final Thoughts

Ladies, don’t let tax season feel overwhelming. With a little planning (and maybe the Lxme community), you can save thousands or even lakhs every year. Know your slab, compare regimes, and make use of all the deductions you’re eligible for.So next time your salary comes in, you can say:
“I saved smart—and spent smarter.”

FAQ:

Further read:

• How the 8th Pay Commission Could Impact Women? 

• 10 Steps to Becoming a Millionaire

• How To Invest in Gold Mutual Fund Through SIP?