As the income tax return filing season for FY26 gets underway, salaried taxpayers can reduce their tax liability by claiming eligible deductions, making tax-saving investments and selecting the tax regime that best matches their income and financial plans. According to reports from NDTV Profit and Business Standard, most tax-saving opportunities remain available under the old tax regime, while the new regime offers a smaller set of deductions. Taxpayers should review salary components, housing-related benefits and retirement contributions before filing returns to ensure they claim all eligible tax benefits. From AY 2024-25, the New Tax Regime is the default option, with taxpayers able to select between old and new regimes annually. Currently, Section 87A allows individuals to claim a rebate of ₹12,500 under the old tax regime and ₹60,000 under the New Tax Regime. A crucial development for FY26 is that if you opt for the new tax regime, you lose LTA exemption entirely, making the old regime more attractive for employees with travel benefits. Under the new regime, salaried individuals with annual salary up to ₹12.75 lakh are not liable to pay taxes, with standard deduction of ₹75,000 and rebate u/s 87A, while under the old regime, standard deduction is ₹50,000 and rebate u/s 87A gives zero tax liability for income up to ₹5 lakh.
Under Section 80C, taxpayers can claim deductions of up to ₹1.5 lakh in a financial year for investments in instruments such as Equity Linked Savings Schemes, Public Provident Fund and tax-saving fixed deposits. As reported by NDTV Profit and Business Standard, National Pension System subscribers can claim deductions on their contributions under Section 80CCD. An additional deduction of up to ₹50,000 is available under Section 80CCD(1B). Employer contributions to the NPS also qualify for tax benefits under these sections. To claim Section 80C deductions, taxpayers must enter the amount eligible for deduction and policy/document identification number. The latest tax benefits also include Section 17(2)(vi) read with Rule 3(8)/3(9), which provides tax relief for fair market value of shares or securities on the date of exercise of option, with exemptions available for listed shares and unlisted securities based on specific conditions. Investment options under Section 80C include Equity Linked Savings Scheme (ELSS), Public Provident Fund (PPF), Employee Provident Fund (EPF), Senior Citizen Saving Scheme, tax-saving fixed deposits, National Saving Certificate (NSC), and life insurance premiums.
Section 80D allows taxpayers to claim deductions on health insurance premiums, with individuals below the age of 60 able to claim up to ₹25,000, while senior citizens can claim up to ₹50,000. According to NDTV Profit and Business Standard, the deduction covers premiums paid for self, spouse, children and parents, helping reduce taxable income. The latest tax benefits include Section 17(2)(viii) read with Rule 3(7)(iii), which provides exemption for free food and beverages provided to employees during working hours, including tea, coffee, non-alcoholic beverages and snacks. Additionally, Section 17(2)(viii) read with Rule 3(7)(iv) exempts free recreation/club facilities provided uniformly to all employees, while Section 17(2)(viii) read with Rule 3(7)(v) covers expenditure incurred by employers for credit cards used by employees or household members. Medical expenses also qualify for deductions under Section 80D, providing comprehensive health coverage benefits.
Home loan borrowers can claim deductions on interest payments under Section 24(b). As reported by NDTV Profit and Business Standard, owners of self-occupied properties can claim up to ₹2 lakh on interest paid during a financial year. First-time homebuyers may also qualify for an additional deduction of up to ₹1.5 lakh under Section 80EEA on home loan interest. Repayment of the principal amount qualifies for deduction under Section 80C. From AY 2025-26, a new schedule Section 24(b) has been added requiring taxpayers to furnish details including loan amount, outstanding balance, and interest on borrowed capital. The latest tax benefits also include Section 17(2)(viii) read with Rule 3(7)(iii), which provides exemption for free food and beverages during working hours, and Section 17(2)(viii) read with Rule 3(7)(iv), which exempts free recreation/club facilities for official purposes. Additional home loan benefits include deductions on home loan principal repayment under Section 80C and additional deduction of ₹50,000 on home loan interest under Section 80EE.
Salaried employees can claim significant tax benefits on various allowances and salary components. House Rent Allowance (HRA) provides exemption if rent paid is less than 10 per cent of basic salary plus dearness allowance. Uniform Allowance is tax-exempt under Section 10(14), while Transport Allowance offers tax benefits on local transport expenses under Section 10(14). Telephone and Internet Allowance provides tax exemption when reimbursed by employers, with employees required to submit bills to claim these benefits. Section 80E covers education loan interest component deductions. Understanding these components is crucial for tax planning, as they can significantly reduce tax outgo when properly claimed. The key is to have clarity about salary slip details and ensure all eligible benefits are claimed to maximize tax savings.
Leave Travel Allowance (LTA) provides significant tax relief for employees, covering air/train/car travel for self and family with exemption limits varying by class of accommodation. The Income Tax Department divides LTA entitlement into 4-year blocks, with the current block period (2022-2025) ending in March 2026. Employer reimburses actual LTA cost without deducting income tax, reflected as "LTA reimbursement" in salary slips. A critical change for FY26 is that if you opt for the new tax regime, you lose LTA exemption entirely, making the old regime more attractive for employees with travel benefits. The exemption amount depends on class of accommodation - air travel in economy class allows full actual cost, while train travel in AC III sleeper or above also covers full actual cost. This regime difference significantly impacts tax planning for salaried employees who frequently travel for work.
