9 Ways to Save Income Tax on Old Tax Regime for FY 2025-26

Under the old regime, there are variety of deductions and exemptions available, especially against salary income. Choosing the most beneficial regime and appropriate tax planning can help you minimum tax outflow, thereby increasing savings.

How to save tax under old regime for FY 2025-26?

Here are the most popular deductions available under the old regime:

• House Rent Allowance (HRA)
• Children Education Allowance
• Home loan interest deduction on self occupied property
• Investment deductions under Section 80C
• Medical insurance premium under section 80D

Income Tax Slabs under the Old Regime

Unlike the new tax regime, more deductions and exemptions are allowed under the old tax regime, which gives taxpayers the benefit of paying lower tax liability. Tax slabs under the old tax regime are as follows:

1. Investment Deductions under Section 80C

Nature of Deduction: Allowed against specified investments and expenses.

Popular investments/ expenses:

• Life insurance premium
• Equity Linked Savings Scheme (ELSS)
• Unit Linked Insurance Plan (ULIP)
• Employee's contribution to Provident Fund
• 5 years tax-saver FD
• Post office savings scheme like Sukanya Samriddhi Yojana
• Public Provident Fund
• National Savings Certificate
• Principal repayment on a home loan

Maximum Limit: Rs. 1.5 lakhs

2. Medical Insurance Premium - Section 80D 

Nature of Deduction: Deduction available against payment of medical insurance premium for self, spouse, children and dependent parents.

Eligible Expenses: 

• Medical insurance premium, 
• Contribution to Central Government Health Scheme (CGHS), 
• Medical expenses for senior citizens for whom insurance premium is not paid,
• Preventive health check-up 

Maximum Limit: Rs. 25,000 for self and family, and Rs, 25,000 for parents. Deduction limit extended to Rs. 50,000 for senior citizens.

3. House Rent Allowance

Nature of Exemption: Exemption allowed on house rent allowance paid by the employer as a part of salary.

Eligibility: Only persons living in rental premises can claim HRA. 

Maximum Limit: Least of the following is exempt.

• Actual HRA received
• Rent paid - 10% of the basic pay
• 40% of Basic Pay (50% of basic pay for Mumbai, Chennai, Delhi and Kolkata) 

4. Contribution to Pension Schemes - Section 80CCC

Nature of Deduction:  Deduction available against contribution to pension funds offered by LIC or other insurer

Maximum Limit: Rs. 1.5 lakhs (including the investments made under section 80C)

5. Contribution made to APY and NPS - Section 80CCD

Nature of Deduction: Employer and the assessee's own contribution against National Pension Scheme (NPS) and Atal Pension Yojana (APY).

Maximum Limit: 

• Assessee's own contribution under section 80CCD(1) - Up to 10% of basic pay can be claimed as a deduction.
• Combined limit of deduction under section 80C, 80CCC, and 80CCD(1) - Rs. 1.5 lakhs
• Additional deduction under section 80CCD(1B) - Rs. 50,000
• Under section 80CCD(2), employer's contributions up to 10% of the basic pay can be claimed as a deduction.

6. Home Loan Interest  - Section 24

Nature of Deduction: Home loan interest due for the financial year can be claimed as a deduction.

Eligibility:

• Interest not paid but due for the financial year can also be claimed as a deduction.
• Interest on both self-occupied and let out property can be claimed as a deduction
•  Interest paid before the completion of construction can also be claimed as pre-construction interest.

Maximum Limit:

• For self occupied property - Rs. 2 lakhs
• For let-out property - Entire interst due can be claimed without any maximum limit.

7. Standard Deduction

Nature of Deduction: Flat deduction of Rs. 50,000 is allowed against salary income.

Eligibility: All salaries employees can claim this deduction, irrespective of level of salary.

Maximum Limit: Rs. 50,000.

8. Rebate

Nature: Taxpayers up to a certain income level can eliminate the tax liability using rebate.

Eligibility: Assessees having income up to Rs. 5 lakhs. 

Maximum Limit: Rs. 12,500

9. Interest Deduction - Section 80TTA and 80TTB

Nature: Deduction can be claimed against savings bank interest and deposit interest.

Eligibility:

• For Section 80TTA: Savings bank interest for the financial year is eligible.
• For Section 80TTB: Savings bank interest and time deposit interest eligible, only for senior citizens.

Maximum Limit:

• For Section 80TTA: Rs. 10,000
• For Section 80TTB: Rs. 50,000

Final Word

The deductions and exemptions available in the old tax regime are more than the new tax regime, but the slab rates are liberal in the new tax regime compared to the old tax regime. Hence, it is crucial for the taxpayer to properly analyse and opt for the beneficial tax regime.