Tax-Saving Schemes for Salaried Employees: Your Guide to Smart Investments for FY 2025-26

Introduction

For most salaried professionals in India, tax season often brings confusion — endless forms, investment choices, and last-minute panic to save taxes. But if you plan smartly and start early, you can not only reduce your tax burden but also grow your wealth over time.

Understanding Tax-Saving Schemes for Salaried Employees isn’t just about saving a few thousand rupees every year. It’s about making disciplined investments that align with your life goals — retirement, education, healthcare, or home ownership — while maximizing tax benefits under the Income Tax Act.

With the financial year 2025–26 approaching, the government continues to promote structured savings, digital tax filings, and simplified tax regimes. This blog by Lares Algotech serves as your detailed roadmap to plan, invest, and save taxes efficiently.

Understanding Tax Regimes for FY 2025–26

Before diving into Tax-Saving Schemes for Salaried Employees, you must understand the two available tax regimes — old and new.

1.1 The Old Tax Regime

The old regime offers a variety of deductions and exemptions that reduce your taxable income. You can claim benefits under various sections like 80C, 80D, and 24(b), as well as allowances like HRA and LTA. However, the tax slabs are slightly higher.

If you invest regularly in tax-saving instruments such as Public Provident Fund (PPF), National Pension System (NPS), or Equity-Linked Savings Schemes (ELSS), the old regime often works better.

1.2 The New Tax Regime

The new regime simplifies taxation by offering lower tax rates but removes most deductions and exemptions. The good news is that from FY 2025–26, the standard deduction has been increased to ₹75,000, and individuals with income up to ₹12.75 lakh may effectively pay zero tax due to rebates.

For those who prefer simplicity and minimal paperwork, the new regime can be beneficial.

1.3 Which Regime Should You Choose?

The choice depends on your financial structure:

If you invest heavily in Tax-Saving Schemes for Salaried Employees such as ELSS, PPF, or life insurance, the old regime is better.
If you prefer higher in-hand salary and fewer deductions, the new regime is ideal.

Each year, you can compare both regimes and select the one that minimizes your tax liability.

Major Deductions and Exemptions for Salaried Employees

Let’s break down the key sections that form the foundation of Tax-Saving Schemes for Salaried Employees in FY 2025–26.

2.1 Standard Deduction

Every salaried person can claim a flat deduction of ₹75,000 from their taxable income under the new regime. This deduction is available regardless of your investment behavior, making it a universal benefit.

2.2 Section 80C

One of the most popular Tax-Saving Schemes for Salaried Employees is Section 80C. You can claim deductions up to ₹1.5 lakh per year by investing in:

Public Provident Fund (PPF)
Employee Provident Fund (EPF)
Life Insurance Premiums
National Savings Certificate (NSC)
Equity Linked Savings Schemes (ELSS)
Principal repayment of home loans
Tuition fees for up to two children

If you plan well, this single section alone can reduce your tax burden significantly.

2.3 Section 80CCD (1B) – NPS

Contributions to the National Pension System (NPS) offer an additional deduction of ₹50,000 beyond the 80C limit. NPS helps you build a retirement corpus with a mix of equity and fixed income. It is one of the most effective Tax-Saving Schemes for Salaried Employees focused on long-term financial stability.

2.4 Section 80D – Health Insurance

Medical costs are rising fast, making health insurance essential. Under Section 80D, you can claim deductions up to ₹25,000 for premiums paid for yourself, spouse, and children. If you also insure your parents, you can claim an additional ₹25,000 (₹50,000 if they are senior citizens).

2.5 Section 80E – Education Loan Interest

If you or your dependents have taken an education loan for higher studies, the interest paid on such a loan qualifies for a deduction under Section 80E. There is no upper limit, making it a powerful benefit for young professionals.

2.6 Section 24(b) – Home Loan Interest

Homeowners can claim up to ₹2 lakh as a deduction on the interest component of their home loan. For those with let-out property, there is no upper limit. Combining 80C (for principal) and 24(b) (for interest) makes home ownership one of the smartest Tax-Saving Schemes for Salaried Employees.

2.7 House Rent Allowance (HRA)

If you live in a rented home, HRA can be claimed as an exemption based on rent paid, salary, and city of residence. It is a significant part of salary structuring for tax optimization.

Popular Tax-Saving Schemes for Salaried Employees

Now let’s explore the actual instruments and how they help reduce taxes while building wealth.

3.1 Public Provident Fund (PPF)

The Public Provident Fund is a government-backed long-term savings plan with a 15-year lock-in. The contribution, interest earned, and maturity amount are all tax-free (Exempt-Exempt-Exempt).

It’s one of the safest and most rewarding Tax-Saving Schemes for Salaried Employees for conservative investors.

3.2 Employee Provident Fund (EPF)

As a salaried individual, you and your employer contribute to the EPF account. Your contribution qualifies for a deduction under 80C, while the employer’s contribution is exempt from tax up to 12% of salary. EPF ensures forced retirement savings.

3.3 Equity Linked Savings Scheme (ELSS)

ELSS mutual funds are market-linked schemes with a three-year lock-in period. Returns are higher than traditional options, though they carry market risk. ELSS is ideal for young professionals seeking aggressive growth and tax savings simultaneously.

3.4 National Pension System (NPS)

The NPS offers dual benefits — retirement savings and additional tax deductions. It invests in equities, corporate bonds, and government securities based on your risk profile. Salaried employees can claim up to ₹50,000 beyond the 80C limit under Section 80CCD(1B).

3.5 National Savings Certificate (NSC)

The NSC is a fixed-income government scheme with a five-year lock-in period. It’s suitable for risk-averse investors who want guaranteed returns and tax benefits under Section 80C.

3.6 Sukanya Samriddhi Yojana (SSY)

For parents of a girl child, SSY offers an excellent opportunity to save for her education or marriage. The scheme provides high interest rates and tax-free returns under 80C.

3.7 Health Insurance

Health insurance under 80D not only provides financial protection but also serves as one of the most practical Tax-Saving Schemes for Salaried Employees. The premium payments are deductible, and many insurers offer cashless treatment options.

3.8 Tax-Saving Fixed Deposits (FDs)

Five-year tax-saving fixed deposits with banks also qualify under 80C. They are suitable for short-term conservative investors who prefer guaranteed returns.

3.9 ULIPs (Unit Linked Insurance Plans)

ULIPs combine investment with insurance. A portion of the premium is invested in equity and debt, and the rest provides life cover. ULIPs qualify under Section 80C but should be chosen carefully for their long-term lock-in.

3.10 Senior Citizen Saving Scheme (SCSS)

For employees nearing retirement, SCSS offers guaranteed returns and quarterly interest payments. It’s eligible under 80C and ensures post-retirement stability.

Step-by-Step Guide to Creating a Tax-Saving Plan

Let’s create a simple roadmap for using Tax-Saving Schemes for Salaried Employees effectively in FY 2025–26.

Step 1: Analyze Your Income and Regime

Start by evaluating your annual income, allowances, and deductions. Compare both tax regimes using an online calculator or guidance from Lares Algotech’s financial experts.

Step 2: Determine Investment Goals

Decide why you want to invest — saving taxes, buying a home, or creating a retirement corpus. Your goals will determine the right instruments.

Step 3: Utilize Section 80C First

Max out your ₹1.5 lakh limit under Section 80C through PPF, EPF, ELSS, or NSC. These are foundational Tax-Saving Schemes for Salaried Employees that also grow your wealth.

Step 4: Add NPS for Retirement

Invest an extra ₹50,000 in NPS to claim an additional deduction under Section 80CCD(1B). It’s one of the best long-term retirement planning tools.

Step 5: Secure Your Health

Invest in health insurance for your family. Medical inflation is rising, and 80D helps you save tax while protecting against emergencies.

Step 6: Evaluate Home and Education Benefits

If you’re repaying a home or education loan, make sure to claim deductions under Sections 24(b) and 80E respectively.

Step 7: Review and Rebalance

Tax planning isn’t a one-time exercise. Revisit your portfolio every six months to ensure it aligns with changing goals and tax laws.

Mistakes to Avoid While Investing in Tax-Saving Schemes

Even the best Tax-Saving Schemes for Salaried Employees can go wrong if not used wisely. Here are common mistakes to avoid:

5.1 Last-Minute Investments

Rushing to invest in March often leads to poor decisions. Start in April to spread investments over 12 months.

5.2 Overlapping Insurance and Investment

Avoid buying traditional insurance just for tax benefits. Instead, choose a term plan for protection and invest separately in ELSS or PPF for returns.

5.3 Ignoring Liquidity

Some instruments have long lock-ins. Maintain an emergency fund before investing heavily in long-term products.

5.4 Not Comparing Regimes

Each year, compare old vs. new tax regimes to ensure you’re optimizing both savings and convenience.

5.5 Lack of Documentation

Keep receipts, investment proofs, and rent slips organized to avoid rejection during tax filing.

Sample Tax-Saving Portfolio for FY 2025–26

Instrument	Amount (₹)	Section	Purpose
PPF	60,000	80C	Long-term savings
ELSS	40,000	80C	Market-linked growth
NSC	25,000	80C	Fixed return
NPS	50,000	80CCD(1B)	Retirement corpus
Health Insurance	25,000	80D	Health protection
Home Loan Principal	50,000	80C	Housing benefit
Home Loan Interest	2,00,000	24(b)	Housing deduction
Education Loan	Variable	80E	Skill/education

This sample portfolio gives a clear balance between safety, liquidity, and growth — the three pillars of smart tax planning.

Aligning Tax-Saving Investments with Financial Goals

Tax-saving must not be treated as a burden. The best Tax-Saving Schemes for Salaried Employees double as financial planning tools when aligned with life goals:

Short-term (0–3 years): Keep funds liquid; choose FDs or short-term ELSS SIPs.
Medium-term (3–10 years): Combine ELSS and PPF for moderate growth.
Long-term (10+ years): Use NPS, ULIPs, and EPF for retirement and wealth creation.

This goal-based investing ensures that you not only save tax today but also build long-term financial independence.

How Lares Algotech Helps in Tax Planning

At Lares Algotech, we go beyond trading and investment technology. Our financial advisory services help clients structure their income, deductions, and investment portfolio using a data-driven approach.

Smart Tools: Automated dashboards that calculate tax liabilities and project returns.
AI-Based Insights: Predictive algorithms to compare tax regimes and optimize investment allocations.
Custom Advisory: Personalized strategies for salaried professionals across income brackets.
Holistic Planning: Integrating tax savings with broader financial goals like retirement, home ownership, and wealth creation.

Lares Algotech’s philosophy is simple: make tax planning as efficient as trading — precise, strategic, and rewarding.

Future Outlook for FY 2025–26

The government continues to encourage digital compliance and simplified taxation. In FY 2025–26:

Salaried employees enjoy higher rebates and standard deductions.
Focus is shifting toward voluntary savings like NPS and ELSS.
Technology platforms make investment tracking and tax filing easier than ever.

As the economy evolves, Tax-Saving Schemes for Salaried Employees will become more goal-oriented, blending automation with smart analytics — exactly what Lares Algotech aims to deliver.

Tax-Saving Tips for 2025–26

Start Early: Begin investing in April, not March.
Use SIPs: Invest in ELSS through monthly SIPs to average market volatility.
Leverage Employer Benefits: Make use of HRA, meal coupons, and reimbursements.
Diversify: Mix debt and equity-based instruments.
Automate Investments: Set up auto-debits to stay consistent.
Review Annually: Tax laws change every year; stay updated.
Avoid Lock-In Traps: Choose flexible instruments unless your goal is long-term.
Combine Family Benefits: Utilize deductions for parents’ health insurance or education fees.

Comprehensive Checklist for Salaried Employees

Before March 31, 2026, ensure you have:

Claimed standard deduction of ₹75,000.
Invested ₹1.5 lakh under Section 80C.
Contributed to NPS for an additional ₹50,000 deduction.
Purchased health insurance for family and parents.
Claimed HRA or home loan benefits.
Saved all proof documents.
Filed your Income Tax Return before the due date.

Ticking all these ensures you’ve fully utilized all Tax-Saving Schemes for Salaried Employees in FY 2025–26.

Conclusion

Tax planning doesn’t have to be stressful. With the right mix of Tax-Saving Schemes for Salaried Employees, you can reduce your liability, increase your savings, and achieve financial stability.

The key is to view tax-saving not as an annual task but as a continuous process. By aligning investments with your life goals, you ensure long-term wealth creation and peace of mind.

As India enters FY 2025–26, the salaried class has more tools, flexibility, and knowledge than ever before. Make use of every deduction, invest consistently, and track your returns.

Lares Algotech encourages every salaried professional to embrace intelligent financial planning powered by data, discipline, and smart technology. Remember, the earlier you plan, the more you save — and the smarter you invest, the faster you grow.

FAQ

What are the top Tax-Saving Schemes for Salaried Employees in FY 2025-26?

The top Tax-Saving Schemes for Salaried Employees in FY 2025-26 include Public Provident Fund (PPF), Employee Provident Fund (EPF), Equity Linked Savings Scheme (ELSS), National Pension System (NPS), and National Savings Certificate (NSC). These instruments provide dual benefits — reducing taxable income and helping build long-term savings. Salaried individuals can also claim tax deductions on health insurance premiums, home loan interest, and tuition fees under various sections of the Income Tax Act. Choosing the right mix of these schemes helps employees save more and achieve their financial goals effectively.

How does Section 80C help in Tax-Saving Schemes for Salaried Employees?

Section 80C allows salaried employees to claim deductions of up to ₹1.5 lakh per year by investing in approved schemes. Some popular Tax-Saving Schemes for Salaried Employees under Section 80C include PPF, ELSS, NSC, life insurance premiums, and home loan principal repayments. By strategically investing in these instruments, employees can lower their taxable income while simultaneously building wealth for future needs such as retirement, education, or housing. Section 80C remains the foundation of effective tax planning for most salaried individuals.

Why should salaried employees invest in PPF?

The Public Provident Fund (PPF) is one of the safest Tax-Saving Schemes for Salaried Employees. It offers guaranteed returns, tax-free interest, and a long-term maturity period of 15 years. Contributions made toward PPF qualify for deductions under Section 80C. Since it’s a government-backed scheme, PPF carries zero market risk and ensures capital protection. Employees can also extend the investment after maturity in blocks of five years, making it a reliable tool for long-term wealth creation and retirement planning.

How does the National Pension System (NPS) benefit salaried employees?

The National Pension System (NPS) is one of the most beneficial Tax-Saving Schemes for Salaried Employees who wish to build a retirement corpus. Under Section 80CCD(1), contributions up to 10% of salary qualify for deductions, while an additional ₹50,000 deduction is available under Section 80CCD(1B). NPS provides exposure to equity, corporate bonds, and government securities, allowing flexible investment choices based on risk appetite. It ensures tax savings today and financial security post-retirement through a mix of growth and stability.

Can ELSS mutual funds be used as Tax-Saving Schemes for Salaried Employees?

Yes, ELSS or Equity Linked Savings Schemes are excellent Tax-Saving Schemes for Salaried Employees. ELSS funds qualify for deductions under Section 80C up to ₹1.5 lakh per year. They have a short lock-in period of just three years and offer higher potential returns than traditional instruments like FDs or PPF. Being equity-oriented, ELSS carries some market risk but also provides superior long-term growth. Investing through monthly SIPs helps manage volatility while achieving consistent tax and wealth benefits.

How does EPF help in saving taxes for salaried individuals?

The Employee Provident Fund (EPF) is one of the most popular Tax-Saving Schemes for Salaried Employees. Contributions made by employees qualify for deductions under Section 80C. The accumulated interest and maturity amount are tax-free under certain conditions. Since EPF is automatically deducted from salary, it encourages disciplined savings. Over time, it builds a substantial retirement corpus. Employers also contribute an equal amount, making EPF a safe, long-term, and tax-efficient savings avenue for salaried professionals.

What is the tax benefit of health insurance for salaried employees?

Health insurance premiums are an essential part of Tax-Saving Schemes for Salaried Employees. Under Section 80D, employees can claim deductions up to ₹25,000 for policies covering self, spouse, and children, and an additional ₹25,000 (₹50,000 for senior citizens) for parents. This benefit not only reduces taxable income but also provides financial protection against rising healthcare costs. A good health insurance plan ensures medical security while lowering your overall tax liability each financial year.

Can home loans be part of Tax-Saving Schemes for Salaried Employees?

Yes, home loans provide multiple tax benefits and are a key part of Tax-Saving Schemes for Salaried Employees. The principal repayment qualifies for deduction under Section 80C (up to ₹1.5 lakh), and the interest paid on the loan is deductible under Section 24(b) (up to ₹2 lakh for self-occupied property). For rented properties, the interest deduction has no upper limit. Home loans thus offer tax relief while helping employees build valuable assets for the future.

How can salaried employees claim HRA exemption?

House Rent Allowance (HRA) is an important component of Tax-Saving Schemes for Salaried Employees. If you live in rented accommodation, you can claim HRA exemption under Section 10(13A). The exempt amount depends on your salary, rent paid, and city of residence. To claim the benefit, keep rent receipts and landlord details ready. HRA helps reduce taxable income significantly for those who do not own a house in their working city.

What are tax-saving fixed deposits (FDs)?

Tax-saving fixed deposits are safe investment options that qualify under Section 80C. These deposits have a lock-in period of five years and are considered low-risk Tax-Saving Schemes for Salaried Employees. The interest earned is taxable, but the principal amount invested helps reduce taxable income. FDs are suitable for conservative investors seeking guaranteed returns and stable income, making them a simple yet effective part of any tax-saving portfolio.

What is the Sukanya Samriddhi Yojana (SSY)?

Sukanya Samriddhi Yojana (SSY) is a government-backed savings plan designed for a girl child. It is one of the best Tax-Saving Schemes for Salaried Employees who want to invest for their daughter’s education or marriage. Contributions qualify for deductions under Section 80C, and both interest and maturity proceeds are tax-free. The scheme offers attractive interest rates, long-term compounding, and financial security for the child’s future.

Can I claim a tax deduction for my child’s education fees?

Yes, under Section 80C, tuition fees paid for up to two children are eligible for tax deductions. It’s one of the lesser-known yet valuable Tax-Saving Schemes for Salaried Employees. The deduction covers school, college, or university fees but excludes donations or late payment charges. Parents can claim this benefit every year, reducing taxable income while investing in their children’s education. Always maintain receipts as proof for smooth claim processing.

How can NPS and EPF together enhance tax savings?

Combining NPS and EPF is a powerful strategy under Tax-Saving Schemes for Salaried Employees. EPF contributions qualify under Section 80C, while NPS investments offer an additional ₹50,000 deduction under Section 80CCD(1B). This combination ensures both immediate tax reduction and long-term retirement planning. NPS also provides flexibility to allocate funds between equity and debt, enhancing portfolio diversification. Together, they create a comprehensive, tax-efficient retirement plan for salaried individuals.

Are ELSS returns taxable for salaried employees?

ELSS returns are partially taxable. Long-term capital gains (LTCG) exceeding ₹1 lakh are taxed at 10% without indexation. However, the tax benefit under Section 80C makes ELSS one of the best Tax-Saving Schemes for Salaried Employees. Even with the LTCG tax, the post-tax returns from ELSS generally outperform fixed-income options. For long-term investors, ELSS offers superior growth potential along with tax efficiency.

What is the standard deduction for salaried employees in FY 2025-26?

The standard deduction for salaried employees in FY 2025-26 is ₹75,000. It applies to both old and new tax regimes and is independent of other Tax-Saving Schemes for Salaried Employees. This deduction automatically reduces your taxable salary income and simplifies the filing process. Even those opting for the new regime can benefit, making it a key feature of simplified tax compliance for all employees.

How does Section 80E help in tax savings?

Section 80E provides tax relief on interest paid for education loans. It is one of the most useful Tax-Saving Schemes for Salaried Employees pursuing higher studies or financing their child’s education. The deduction has no upper limit and can be claimed for eight consecutive years. It helps individuals reduce their tax burden while investing in skill development or academic growth, supporting long-term career and financial benefits.

How can salaried employees save tax without investment?

Salaried employees can save tax without additional investments through allowances and exemptions like HRA, standard deduction, and home loan interest. These provisions are part of broader Tax-Saving Schemes for Salaried Employees. By restructuring salary components—such as adding meal coupons, leave travel allowance (LTA), or reimbursements—employees can optimize take-home pay while minimizing taxes. Choosing the right tax regime also ensures efficient tax planning.

Can both husband and wife claim tax benefits under Section 80C?

Yes, if both spouses are earning and investing separately, each can claim a deduction of up to ₹1.5 lakh under Section 80C. This effectively doubles the family’s overall tax benefits under various Tax-Saving Schemes for Salaried Employees. Joint investments in PPF, ELSS, or home loans can be structured efficiently to optimize deductions and wealth creation across both incomes.

When should salaried employees start tax planning?

Tax planning should begin at the start of the financial year — April. Early planning ensures better utilization of Tax-Saving Schemes for Salaried Employees, allowing investments to grow longer through compounding. Monthly SIPs in ELSS or NPS contributions spread over the year also prevent last-minute financial pressure. Starting early guarantees stable returns and stress-free compliance during tax season.

Why is financial planning important along with tax saving?

Tax saving is just one part of financial planning. By using Tax-Saving Schemes for Salaried Employees like PPF, ELSS, NPS, and health insurance strategically, you achieve both goals — reducing tax liability and building wealth. Financial planning ensures that your savings are aligned with future goals like retirement, education, or home ownership. A well-balanced approach helps salaried employees achieve long-term stability and growth while staying compliant with tax laws.