Key Income Tax Deductions and Exemptions in India
Reviewed by the Commoner Law Editorial Team. Sourced from Indian central (Union) law — Constitution of India, central Acts of Parliament, and Supreme Court decisions. State-level information reflects each state's own Acts and High Court rulings. Written in plain language for general understanding — this is educational content, not legal advice. Our editorial standards
What is this right?
The Income Tax Act gives Indian taxpayers a long menu of ways to reduce taxable income — but most of them only work under the old regime. The new regime under s. 115BAC trades them for lower slab rates. Run both numbers each year before deciding.
- Section 80C (up to ₹1,50,000): Investments in EPF, PPF, ELSS, NSC, life insurance premiums, home loan principal repayment, tuition fees, 5-year bank FD, and Sukanya Samriddhi Yojana.
- Section 80CCD(1B): Additional ₹50,000 for contributions to the National Pension System (NPS) over and above 80C — combined ceiling is thus ₹2 lakh.
- Section 80D: Premium paid for health insurance — up to ₹25,000 for self/family; additional ₹25,000 (₹50,000 for senior citizens) for parents' health insurance.
- Section 24(b): Interest on home loan for a self-occupied property — deduction up to ₹2,00,000 per year.
- Standard deduction: ₹75,000 (from AY 2025-26, enhanced under the new regime too) for all salaried employees and pensioners.
- HRA (s. 10(13A)): Actual HRA received, subject to calculation (least of: actual HRA; 50%/40% of salary; rent paid minus 10% of salary) — only under old regime.
- New tax regime (s. 115BAC): Lower slab rates but most deductions (80C, 80D, HRA, LTA) are not available — evaluate which regime gives lower tax.
When does it apply?
- You are filing your income tax return and wish to maximise eligible deductions.
- You want to decide between the old and new tax regimes.
- Your employer has deducted excess TDS because you did not declare deductions in time.
What to Do to Maximise Your Income Tax Deductions in India
- Submit a declaration of investments (Form 12BB) to your employer at the start of the financial year — this ensures TDS is deducted at the correct rate.
- Even if you miss the Form 12BB deadline, claim all eligible deductions in your ITR — any excess TDS will be refunded.
- Use the Income Tax Department's online tax calculator to compare old vs new regime taxes before the start of each financial year.
- Keep all investment proofs (premium receipts, EPF passbook, home loan statement) for at least 6 years — the department can call for verification up to 6 years after assessment.
What should you NOT do?
- Do not claim deductions for investments you have not actually made — fraudulent deduction claims attract penalties of 200% of the tax evaded under s. 270A.
- Do not switch tax regimes (old to new or vice versa) each year if you have business income — individuals with business income can switch only once from new to old regime.
- Do not miss the year-end investment deadline (31 March) — investments for 80C deductions must be made within the financial year they are claimed.
Common Questions
When does key income tax deductions and exemptions apply?
You are filing your income tax return and wish to maximise eligible deductions.You want to decide between the old and new tax regimes.Your employer has deducted excess TDS because you did not declare deductions in time.
What should I do to reduce my income tax bill legally using deductions available in India?
Submit a declaration of investments (Form 12BB) to your employer at the start of the financial year — this ensures TDS is deducted at the correct rate.Even if you miss the Form 12BB deadline, claim all eligible deductions in your ITR — any excess TDS will be refunded.Use the Income Tax Department's online tax calculator to compare old vs new regime taxes before the start of each financial year.Keep all investment proofs (premium receipts, EPF passbook, home loan statement) for at least 6 years — the department can call for verification up to 6 years after assessment.
What mistakes should I avoid with key income tax deductions and exemptions?
Do not claim deductions for investments you have not actually made — fraudulent deduction claims attract penalties of 200% of the tax evaded under s. 270A.Do not switch tax regimes (old to new or vice versa) each year if you have business income — individuals with business income can switch only once from new to old regime.Do not miss the year-end investment deadline (31 March) — investments for 80C deductions must be made within the financial year they are claimed.