Tax Planning in the New Era
With the Income Tax Act, 2025 now governing your finances, tax planning isn’t just about stuffing money into 80C instruments anymore. The landscape has shifted, and so must your strategy.
Strategy 1: Leverage the ₹12.75 Lakh Zero-Tax Threshold
Under the new regime, income up to ₹12 lakh is tax-free (Section 87A rebate), and with the ₹75,000 standard deduction, salaried individuals earning up to ₹12.75 lakh pay zero tax. If your income is near this threshold, consider deferring bonuses or structuring salary components to stay within it.
Strategy 2: Maximise NPS Contributions (Both Regimes)
The employer’s NPS contribution up to 14% of salary is deductible under both old and new tax regimes. This is one of the few deductions that works across regimes. Additionally, the employee’s own contribution (Section 80CCD(1B)) of up to ₹50,000 is available under the old regime.
Strategy 3: Use the Updated Allowance Limits
Under the new IT Rules 2026:
- Children’s Education Allowance: ₹3,000/month/child
- Hostel Allowance: ₹9,000/month/child
- Free Meals: ₹200/meal
Ensure your salary structure captures these updated limits.
Strategy 4: Apply for NIL-TDS Certificate
If your total income is below the taxable threshold, apply for a NIL-TDS certificate at the start of the year. This prevents unnecessary TDS deductions on salary, interest income, and other payments.
Strategy 5: Claim Refunds on Belated Returns
If you missed filing returns in previous years and had excess TDS deducted, the new Act allows refund claims on belated and revised returns. Don’t leave money on the table.
Strategy 6: Structure Business Income via Presumptive Taxation
If you’re a professional or small business owner, presumptive taxation (declaring profits at a fixed percentage of turnover) can significantly reduce compliance burden and effective tax rates.
Strategy 7: Capital Gains Harvesting
If you hold equity investments, consider booking long-term capital gains up to ₹1.25 lakh annually to utilise the exempt threshold. Reinvest immediately to reset your cost basis.
Strategy 8: Health Insurance for the Entire Family
Under the old regime, Section 80D allows deductions for health insurance premiums — up to ₹25,000 for self/family and an additional ₹50,000 for senior citizen parents. This totals ₹75,000 in deductions.
Strategy 9: Home Loan Benefits (Old Regime)
If you’re in the old regime, the combination of Section 80C (principal up to ₹1.5L) and Section 24(b) (interest up to ₹2L) can provide up to ₹3.5 lakh in deductions.
Strategy 10: Charitable Donations (Section 80G)
Donations to approved institutions qualify for deductions under Section 80G — ranging from 50% to 100% of the donated amount. Keep all donation receipts and 80G certificates for filing.
Ready to optimise your taxes? Connect with SmartAITax for an AI-powered tax planning consultation tailored to your income profile.
