Tax saving for salaried professionals in 2025: Strategies you need to know

For salaried professionals, effective tax planning is key to reducing tax liabilities. With a range of tax-saving options available under the Income Tax Act, it is important to leverage these to their full potential.

If you are wondering, how can you save tax on salary in 2025, here are the best strategies for optimising your tax savings:

1. Maximise Section 80C deductions

One of the most common ways to save tax on salary is by fully utilising the ₹1.50 lakh limit under Section 80C. There are several income tax rebates for salaried employees under this section, including:

• Investing in Public Provident Fund (PPF): PPF offers tax-free returns and is a secure way to save.
• Contributing to Employee Provident Fund (EPF): Contributions to the Employee Provident Fund (EPF) also qualify for tax deductions.
• Tax saving Fixed Deposits (FDs) and Equity Linked Savings Scheme (ELSS): Both tax saving options offer tax rebates while also generating returns. ELSS, in particular, offers higher returns due to its stock market exposure.

By wisely investing in these options, you can effectively reduce your taxable income and enhance your savings.

2. Leverage health insurance (Section 80D)

Health insurance is another powerful tax-saving option. Under Section 80D, you can claim deductions on premiums paid for policies covering yourself, your spouse, children, and parents. The maximum deductible amount is ₹1 lakh.

• Increase deduction by adding parents: If your parents are senior citizens, the deduction limit increases, offering additional tax benefits.
• Consider critical illness coverage: This provides more coverage while also contributing to tax savings.

By investing in health insurance, you not only protect your health but also significantly reduce your taxable income.

Read More: All About Tax Saving Schemes

3. Optimise house rent allowance (HRA)

If you are living in rented accommodation, HRA is one of the most effective tax-saving strategies. The amount exempted from tax is calculated based on your rent, salary, and the city in which you live.

• Maintain proper documentation: To maximise HRA exemptions, make sure you keep valid rent receipts.

• Pay rent to family members: If you live with parents, paying rent to them allows you to claim HRA exemptions.

By optimising your HRA, you can save a significant portion of your salary from being taxed, especially if you reside in major cities where rental costs are high.

4. National Pension Scheme (NPS) for retirement planning

If you are looking to save for retirement while benefiting from tax deductions, the National Pension Scheme (NPS) is a great option. Under Section 80CCD (1), you can claim tax deductions up to ₹1.50 lakh. Additionally, Section 80CCD(1B) allows for an extra ₹50,000 in tax savings, over and above the 80C limit.

By contributing regularly to NPS, you not only build a secure retirement corpus but also receive substantial tax benefits, making it one of the best tax-saving options for salaried professionals.

5. Claim deductions on loan interest under Section 24(b)

For those who have home loans, Section 24(b) offers tax deductions on interest paid, up to ₹2 lakh per year. This is a great way to save tax on salary, particularly for those in higher income tax brackets.

• Joint home loan: If possible, consider taking a joint home loan. This allows you and your co-borrower to share the tax deductions and maximise savings.

This strategy is ideal for salaried individuals who own property and wish to reduce their taxable income through home loan interest deductions.

6. Use the new tax regime to your advantage

The new tax regime offers lower tax rates but removes deductions and exemptions. To decide whether it is beneficial for you, assess whether your total deductions (from options like 80C, 80D, etc.) exceed the new tax slabs.

• Compare both regimes: If your tax savings from deductions are greater than the new tax rates, stick with the old regime. If not, the new tax regime could offer lower tax liabilities.

Understanding how the new tax regime fits into your overall tax planning can help you decide which option will maximise your savings.

7. Claim deductions on education loan interest

If you are repaying an education loan, the interest paid is eligible for deductions under Section 80E. This deduction is unlimited in amount, making it an excellent strategy for salaried employees with children pursuing higher education.

• Claim from the first year: Start claiming this deduction from the first year of loan repayment to maximise your tax benefits until the loan is paid off.

This strategy offers substantial relief for those who are financing higher education, reducing your taxable income each year.

To sum up

Tax planning for salaried employees in 2025 is all about making the most of available deductions and exemptions. Whether it is maximising Section 80C, leveraging health insurance deductions, or taking advantage of NPS contributions, there are several ways to save tax on salary.

By implementing these tax-saving options and staying informed about income tax rebates for salaried employees, you can ensure that your finances are optimally managed, allowing you to reduce your tax liabilities and secure your financial future.

Always assess your specific situation, income, and goals to ensure that you are making the most of these opportunities.