Investments that reduce your tax, and which regime they suit
Most tax-saving advice assumes you are on the old regime. That assumption is now the first thing to check.
For years, saving tax in India meant one thing: claiming deductions, mostly under section 80C. The arrival of the new regime changed the question, because most of those deductions do not apply there.
Start with the regime, not the product
The new regime offers lower slab rates and removes most deductions. The old regime keeps higher rates and lets you claim them. Which leaves you better off depends on how much you would actually have claimed.
Someone with a home loan, insurance premiums and a full 80C allocation may still do better on the old regime. Someone without those is usually better off on the new one.
The main deduction instruments, if the old regime suits you
| INSTRUMENT | WHAT IT IS | WHO IT SUITS |
|---|---|---|
| PPF | A long-term government savings scheme | Long lock-in, interest has historically been tax-free |
| EPF | Employer-linked provident fund | Contributions usually count towards 80C automatically |
| ELSS funds | Equity mutual funds with a tax benefit | Shortest lock-in among 80C options, but market-linked |
| Tax-saving FD | A fixed deposit with a five-year lock-in | Safe and predictable. Interest is taxable |
| Life insurance premium | Term or traditional policies | Pay for the cover, not the deduction |
| NPS | Retirement scheme with an additional deduction | Has its own limit over and above 80C |
Deductions that are not investments
- Health insurance premium, for yourself and for dependent parents.
- Interest on an education loan.
- Interest and principal on a home loan, under separate sections.
- Donations to eligible institutions.
Worth knowing
Limits, eligibility and which regime each applies under change with every budget. Treat this as a map of the categories rather than a current rulebook, and confirm the figures for the year you are filing.
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