Income Tax Planning India 2026-27: Complete Salaried Guide
Step-by-step income tax planning for salaried Indians in 2026-27: choose your regime, use 80C/80D/NPS/HRA toolkit, worked examples at ₹10L and ₹15L salary. Full tax-saving roadmap.
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Income Tax Planning India 2026-27: The Complete Salaried Guide
Tax planning for salaried employees in India comes down to one core question answered early in the financial year: old regime or new? After that, it's about using every legitimate tool available — in the right order, for the right amount.
This guide covers the full picture for Tax Year 2026-27 (income April 2026 to March 2027). Regime selection, the complete deduction toolkit, a step-by-step planning workflow, and worked examples at ₹10 lakh and ₹15 lakh gross salaries.
Use the tax calculator alongside this guide to run exact numbers for your salary.
Step 1: understand the two regimes
The Income Tax Act 2025 (effective April 1, 2026) formalises two coexisting regimes. The new regime is the default — if you do nothing, you're on it. To access old-regime deductions, you must actively opt in by submitting Form 12BB to your employer at the start of the financial year.
New regime slabs (Tax Year 2026-27)
| Taxable Income | Rate |
|---|---|
| Up to ₹4 lakh | 0% |
| ₹4L – ₹8L | 5% |
| ₹8L – ₹12L | 10% |
| ₹12L – ₹16L | 15% |
| ₹16L – ₹20L | 20% |
| ₹20L – ₹24L | 25% |
| Above ₹24L | 30% |
Standard deduction: ₹75,000. Section 87A rebate: tax fully waived for taxable income up to ₹12 lakh (maximum rebate ₹60,000). Net result: zero tax for salaried employees with gross income up to ₹12.75 lakh.
Deductions not available: 80C, 80D, HRA (Section 10(13A)), home loan interest (Section 24), LTA.
Old regime slabs
| Taxable Income | Rate |
|---|---|
| Up to ₹2.5 lakh | 0% |
| ₹2.5L – ₹5L | 5% |
| ₹5L – ₹10L | 20% |
| Above ₹10L | 30% |
Standard deduction: ₹75,000. Section 87A rebate: up to ₹12,500 for taxable income up to ₹5 lakh.
Deductions available: 80C (₹1.5L), 80D (₹25K–₹1L), NPS 80CCD(1B) (₹50K), HRA, home loan interest Section 24 (up to ₹2L), LTA, and more.
When to choose each
| Situation | Recommended Regime |
|---|---|
| Gross salary ≤ ₹12.75L | New regime (zero tax) |
| No home loan, deductions < ₹3L | New regime |
| Renting in metro, HRA + 80C > ₹3.5L | Run both — old may win |
| Home loan with outstanding balance > ₹30L | Old regime likely better |
| Salary > ₹15L with large deduction stack | Compare both carefully |
For a detailed salary-by-salary comparison, see the old vs new tax regime guide.
Step 2: the deduction toolkit
Section 80C — up to ₹1.5 lakh
The most widely used deduction. Available only under the old regime. The ₹1.5 lakh annual limit covers the combined total across all qualifying instruments:
- EPF (Employee Provident Fund): Your 12% contribution from payslip already counts. Most salaried employees partially use 80C without realising it.
- ELSS (Equity Linked Savings Scheme): 3-year lock-in mutual funds. Shortest lock-in among 80C options. Market-linked returns.
- PPF (Public Provident Fund): 15-year lock-in, government-backed, 7.1% interest, tax-free maturity.
- NPS Tier-I contributions: Counts within 80C limit.
- Life insurance premium: Term plan premiums for self, spouse, children.
- Home loan principal repayment: The principal portion of your EMI.
- Children's tuition fees: For up to two children, tuition fees only.
- NSC, SCSS, SSY: Fixed-income government-backed instruments.
Strategy: Count your EPF contribution first. If it already touches ₹1.5L (possible above ₹75K basic salary), you've used your 80C limit automatically. If there's headroom, ELSS via SIP is the most tax-efficient addition for long-term investors.
See the full breakdown in the Section 80C tax-saving guide.
Section 80D — health insurance premiums
Available under both old and new regimes (with limits under new regime for NPS employer contribution only; 80D is old regime only).
| Situation | Deduction limit |
|---|---|
| Self + spouse + children (below 60) | ₹25,000 |
| Self + spouse + children (if any member is 60+) | ₹50,000 |
| Parents (below 60) | Additional ₹25,000 |
| Parents (60 or above) | Additional ₹50,000 |
Maximum combined deduction: ₹1 lakh (if you and your parents are all senior citizens).
A family floater covering self, spouse, children at ₹10,000–15,000/year premium plus a separate senior-citizen parents plan at ₹25,000–30,000/year can easily generate ₹40,000–50,000 in deductions.
Section 80CCD(1B) — additional NPS contribution
An additional ₹50,000 deduction over and above the 80C limit of ₹1.5 lakh. This is exclusive to NPS Tier-I contributions.
Effective result: by combining 80C and 80CCD(1B), you can reduce taxable income by ₹2 lakh from these two sections alone.
Under new regime: this specific deduction is not available to employees as a self-contribution deduction. However, employer NPS contributions up to 10% of basic salary remain deductible under 80CCD(2) even in the new regime — this is one case where new-regime taxpayers should check whether their employer offers NPS as a CTC component.
HRA — House Rent Allowance exemption
Only available under old regime. If you rent your home and receive HRA in your salary, the exemption calculation is the minimum of:
- Actual HRA received from employer
- Rent paid minus 10% of basic salary
- 50% of basic salary (metro cities) or 40% (other cities)
Update from the Income Tax Act 2025: Metro cities for HRA purposes now include Bengaluru, Pune, Hyderabad, and Ahmedabad (in addition to Delhi, Mumbai, Kolkata, Chennai). If you rent in any of these eight cities, the applicable rate is 50%, not 40%. This change is effective April 1, 2026.
For the complete HRA formula with worked examples, see the HRA exemption guide.
Standard deduction
₹75,000 for salaried employees — available under both old and new regimes. This is already factored into salary TDS by your employer and does not require any action.
Section 24(b) — home loan interest
Up to ₹2 lakh per year in home loan interest can be deducted from taxable income. Available only under old regime. This is one of the most powerful deductions available — at ₹2L deduction and 30% tax bracket, it saves ₹62,400 per year in tax.
Under new regime: home loan interest deduction is not available. This is often the deciding factor for homeowners with large outstanding loans.
Step 3: year-round tax planning workflow
April–May: lock in your regime decision
This is the critical window. Once you submit Form 12BB to your employer declaring old regime, or stay silent and default to new regime, your TDS for the year is set accordingly.
Steps:
- List all deductions you actually have or will have: EPF (from payslip), health insurance premium, HRA (if renting), home loan interest (if applicable), NPS contributions.
- Use the tax calculator to run both regimes with your real numbers.
- Submit Form 12BB to HR if choosing old regime. Include rent agreement, insurance premium receipts, home loan details.
June–September: book your investments
For 80C instruments requiring investment:
- ELSS: Set up a monthly SIP starting April/May so the full ₹1.5L is invested by March without any year-end rush.
- PPF: Annual lump-sum investment before April 5 earns interest for the full month. Depositing in April gets you 12 months of interest.
- NPS 80CCD(1B): Contribute in one or two tranches, not a last-minute March dump.
October–December: mid-year check and declaration
Most employers ask for investment declarations in October–December to estimate remaining TDS.
- Update declared amounts if actual investments have changed.
- Submit rent receipts for HRA if you haven't already.
- Check if you're on track to hit your targeted 80C amount by March.
January–March: final proofs submission
Employers ask for actual investment proofs (not just declarations) in January–February.
- Submit ELSS/PPF/NPS statements, insurance receipts, home loan certificates.
- Finalize any last-minute PPF or NPS contributions before March 31.
April–July: file your ITR
ITR filing for Tax Year 2026-27 opens after April 1, 2027. Deadline: July 31, 2027 for ITR-1 and ITR-2 (salaried individuals).
For details on the filing process, deadlines, and common mistakes, see the ITR filing guide.
Worked example 1: ₹10 lakh gross salary
Profile: Salaried software engineer, ₹10L gross, paying ₹15,000/month rent in Bengaluru, no home loan.
New regime calculation
| Item | Amount |
|---|---|
| Gross salary | ₹10,00,000 |
| Standard deduction | −₹75,000 |
| Taxable income | ₹9,25,000 |
Tax on ₹9,25,000 under new slabs:
- ₹4L × 0% = ₹0
- ₹4L–₹8L (₹4L) × 5% = ₹20,000
- ₹8L–₹9.25L (₹1.25L) × 10% = ₹12,500
- Subtotal: ₹32,500
- 4% health and education cess: ₹1,300
- Total tax: ₹33,800
Section 87A does not apply (taxable income > ₹12L threshold is not met to get zero — it only zeroes tax if taxable income ≤ ₹12L; here taxable is ₹9.25L so 87A rebate of ₹60,000 covers the full ₹32,500).
Wait — recalculating: 87A rebate under new regime applies if taxable income (post-deduction) is ≤ ₹12L, and the rebate equals the full tax amount up to ₹60,000. Here taxable income = ₹9.25L ≤ ₹12L, so full tax (₹33,800) is offset.
New regime tax: ₹0
Old regime calculation
Assume: EPF already using ₹1L of 80C, adds ₹50K ELSS = 80C full at ₹1.5L. Health insurance ₹15,000 (80D). HRA in Bengaluru: basic = ₹5L (50% of CTC), HRA received = ₹2L. Rent paid = ₹1.8L. HRA exemption = min(₹2L, ₹1.8L−₹50K=₹1.3L, 50%×₹5L=₹2.5L) = ₹1.3L.
| Deduction | Amount |
|---|---|
| Standard deduction | ₹75,000 |
| Section 80C | ₹1,50,000 |
| Section 80D | ₹15,000 |
| HRA exemption | ₹1,30,000 |
| Total deductions | ₹3,70,000 |
Taxable income: ₹10L − ₹3.7L = ₹6.3L
Tax on ₹6.3L under old slabs:
- ₹2.5L × 0% = ₹0
- ₹2.5L–₹5L (₹2.5L) × 5% = ₹12,500
- ₹5L–₹6.3L (₹1.3L) × 20% = ₹26,000
- Subtotal: ₹38,500
- 4% cess: ₹1,540
- Total tax: ₹40,040
Verdict at ₹10L: New regime wins decisively. Even with HRA + full 80C + 80D, old regime costs ₹40,040 vs ₹0 under new regime.
Worked example 2: ₹15 lakh gross salary
Profile: Senior manager, ₹15L gross, renting in Mumbai for ₹25,000/month, has a home loan (outstanding ₹40L, interest ₹3.2L in year 1, claim ₹2L under Section 24).
New regime calculation
| Item | Amount |
|---|---|
| Gross salary | ₹15,00,000 |
| Standard deduction | −₹75,000 |
| Taxable income | ₹14,25,000 |
Tax on ₹14.25L:
- ₹4L × 0% = ₹0
- ₹4L–₹8L × 5% = ₹20,000
- ₹8L–₹12L × 10% = ₹40,000
- ₹12L–₹14.25L (₹2.25L) × 15% = ₹33,750
- Subtotal: ₹93,750
- 4% cess: ₹3,750
- New regime tax: ₹97,500
Old regime calculation
Assume basic salary = ₹7.5L (50% of CTC). HRA received = ₹3L. Rent paid = ₹3L. HRA exemption = min(₹3L, ₹3L−10%×₹7.5L=₹3L−₹75K=₹2.25L, 50%×₹7.5L=₹3.75L) = ₹2.25L.
| Deduction | Amount |
|---|---|
| Standard deduction | ₹75,000 |
| Section 80C (EPF + ELSS fills up) | ₹1,50,000 |
| Section 80D (family + parents) | ₹40,000 |
| HRA exemption (Mumbai) | ₹2,25,000 |
| Section 24 home loan interest | ₹2,00,000 |
| NPS 80CCD(1B) | ₹50,000 |
| Total deductions | ₹7,40,000 |
Taxable income: ₹15L − ₹7.4L = ₹7.6L
Tax on ₹7.6L:
- ₹2.5L × 0% = ₹0
- ₹2.5L–₹5L × 5% = ₹12,500
- ₹5L–₹7.6L (₹2.6L) × 20% = ₹52,000
- Subtotal: ₹64,500
- 4% cess: ₹2,580
- Old regime tax: ₹67,080
Verdict at ₹15L: Old regime saves ₹30,420 (₹97,500 − ₹67,080), but only because this profile has home loan + NPS + full HRA stack. Without the home loan, new regime would win at ₹15L. See old vs new regime comparison for more scenarios.
Step 4: Regime comparison summary table
| Gross Salary | New Regime Tax | Old Regime (moderate deductions) | Old Regime (home loan + full stack) |
|---|---|---|---|
| ₹8L | ₹0 | ₹23,400 | ₹0 |
| ₹10L | ₹0 | ₹40,000 | ₹10,000 |
| ₹12L | ₹0 | ₹1,06,600 | ₹40,000 |
| ₹15L | ₹97,500 | ₹1,95,000 | ₹67,000 |
| ₹20L | ₹1,92,400 | ₹3,51,000 | ₹1,30,000 |
Note: "Moderate deductions" = SD + 80C + 80D only. "Full stack" = SD + 80C + 80D + NPS + HRA + home loan interest. Figures approximate, 4% cess included.
At every salary level, new regime wins unless you have a substantial deduction stack with a home loan. The threshold where home-loan old-regime beats new regime is roughly ₹15L+ gross.
Common tax planning mistakes to avoid
1. Defaulting to new regime without checking your deductions If you have HRA, a home loan, or both — spending 10 minutes calculating old-regime tax can save ₹30,000–₹80,000 annually. Don't skip this step.
2. Waiting until March for 80C investments PPF interest is calculated on the 5th of each month. Money deposited by April 5 earns interest for April; money deposited in March earns interest only for March. Yearly ELSS SIP in April–March builds a more disciplined corpus than a March lump sum.
3. Missing 80CCD(1B) — the bonus ₹50,000 deduction Many salaried employees on old regime who are already using full 80C miss the additional ₹50,000 NPS deduction under 80CCD(1B). At 30% bracket, that's ₹15,000 in tax savings.
4. Not checking if your employer offers NPS under 80CCD(2) Employer NPS contributions up to 10% of basic salary are deductible even under the new regime. If your CTC structure doesn't include this, ask HR whether it can be restructured — it's a genuine new-regime tax benefit.
5. Forgetting to opt in to old regime via Form 12BB New regime is the default. If your calculation shows old regime saves more and you don't submit Form 12BB before the year starts, your TDS runs on new-regime rates all year. You can correct this at ITR filing, but you'll have overpaid TDS for 11 months.
6. Claiming HRA without landlord PAN when rent exceeds ₹1 lakh/year For rent above ₹8,334/month (₹1L+/year), the landlord's PAN is mandatory. Without it, the exemption above ₹1L is disallowed. Don't claim what you can't document.
7. Not re-opting into old regime after changing jobs If you changed employers mid-year, your new employer defaults to new regime. Submit Form 12BB to your new employer if you want old-regime TDS from the point of joining.
Quick-start checklist for Tax Year 2026-27
- Run old vs new regime comparison using the tax calculator
- Submit Form 12BB to HR if choosing old regime (do this in April–May)
- Confirm EPF contribution on payslip — this counts toward 80C
- Set up ELSS SIP for remaining 80C headroom
- Check health insurance coverage and note premiums for 80D
- If renting: confirm HRA city category is 50% or 40% with payroll (new cities added from April 2026)
- If home loan: get interest certificate from bank, confirm Section 24 claim
- Open NPS Tier-I account if not already, contribute for 80CCD(1B)
- File ITR by July 31, 2027 for Tax Year 2026-27
Related guides in this series
- Old vs new tax regime 2026-27 — which saves more at your salary
- New Income Tax Act 2025 — what actually changed for salaried Indians
- Top tax-saving options under Section 80C
- HRA exemption calculation 2026 — with worked examples
- ITR filing deadline 2026 — complete filing guide
Frequently asked questions
Is the new tax regime always better for salaried employees in 2026-27?
Not always, but it is better in most cases. For salaries up to ₹12.75 lakh, new regime gives zero tax, making it clearly better unless you have unusual deduction situations. Between ₹12.75L and ₹20L, the outcome depends on your deduction stack — particularly whether you have a home loan. Above ₹20L with a large home loan and full 80C/NPS/HRA stack, old regime can occasionally win. Use the tax calculator to compare based on your specific numbers.
Can I switch between old and new tax regime every year?
Salaried employees can switch regimes every year. You inform your employer via Form 12BB before the financial year starts. If you miss that window, the employer defaults to new regime for TDS purposes, but you can still choose the correct regime when filing your ITR. Switching is free and does not carry any penalty.
What is the maximum tax I can save under the old regime in 2026-27?
With full utilisation: 80C (₹1.5L) + 80CCD(1B) NPS (₹50K) + 80D (up to ₹1L for senior-citizen parents) + HRA (varies by salary and rent) + home loan interest under Section 24 (up to ₹2L) + standard deduction (₹75K). A salaried employee with all these in place can reduce taxable income by ₹6–7 lakh, saving ₹1.2–2.1 lakh in tax depending on salary level.
Does the standard deduction of ₹75,000 apply to both regimes?
Yes. The ₹75,000 standard deduction for salaried employees is available under both old and new tax regimes. It does not require any action — your employer accounts for it automatically in TDS calculations.
What happens if I forget to submit rent receipts to my employer for HRA?
If you pay rent but your employer doesn't factor in HRA (due to missing documentation), excess TDS gets deducted throughout the year. You can still claim the HRA exemption when filing your ITR and receive the excess TDS as a refund. Keep rent receipts and your rent agreement — you'll need them. If rent exceeds ₹1 lakh per year, also keep a record of your landlord's PAN.
Is Section 80CCD(2) employer NPS contribution available under the new regime?
Yes. Employer NPS contributions under 80CCD(2) — up to 10% of basic salary — are deductible under both old and new regimes. This is one of the few deductions that applies in the new regime. If your employer offers an NPS benefit as part of CTC, it is worth accepting regardless of which regime you choose.
Tax figures for Tax Year 2026-27. Assumes salaried income, no surcharge (income below ₹50L). Worked examples use approximate basic-salary proportions for illustration. Actual numbers will vary. Consult a CA for your specific situation.