As the financial year 2025-26 progresses, Indian taxpayers are once again seeking smart ways to reduce tax liabilities while growing their savings. With the choice between the old and new tax regimes, understanding current deductions and limits—especially those under Section 80C, 80D, 80CCD(1B), and others—can help you plan wisely. This guide covers the most relevant and high-impact tax-saving instruments available right now.
Understanding Old vs. New Tax Regime
| Regime | Key Features |
|---|---|
| Old Tax Regime | Lower exemption threshold; allows deductions such as 80C, 80D, etc. |
| New Tax Regime | Higher basic exemptions and simplified slabs but minimal deductions. |
The new regime offers:
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A standard deduction of ₹75,000 for salaried taxpayers.
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Higher exemption thresholds—effectively up to ₹12.75 lakh tax-free for salaried individuals.
The old regime allows deductions like 80C and 80D but has lower basic exemption limits. Depending on your investments, it may still be more beneficial.
Section 80C – The Workhorse Deduction (Old Regime Only)
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Deduction limit: Maximum ₹1.5 lakh per year for eligible instruments like ELSS, PPF, NSC, life insurance, home loan principal, tuition fees, etc.
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No change announced for FY 2025-26; still ₹1.5 lakh.
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Popular options:
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ELSS: 3-year lock-in, equity-linked, high potential returns.
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PPF / NSC / Tax-saving FDs / SSY: Low risk, varied lock-ins.
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Note: With many people opting for the new regime, ELSS is seeing outflows—₹1,600 crore pulled from Q1 FY26 as investors skip tax-saving instruments.
Section 80CCD – Additional Benefits with NPS
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Within 80C Limit: Contributions up to ₹1.5 lakh counted under Section 80CCD(1) as part of Section 80C.
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Extra Deduction: Section 80CCD(1B) offers additional ₹50,000 deduction over and above 80C limit—effective if you invest in NPS.
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Employer Contribution: Deductible under 80CCD(2):
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Up to 14% of basic + DA (new regime)
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Up to 10% (old regime)
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Benefit: You can currently save up to ₹2 lakh in deductions by combining 80C and 80CCD(1B)—a significant edge.
Section 80D – Health Insurance Premiums
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Deduction Limits:
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Self, spouse, children: up to ₹25,000
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If covering parents (below 60): +₹25,000
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If covering senior citizen parents: up to ₹50,000
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Use this to protect your family and reduce taxable income simultaneously.
Frequently Overlooked Deductions
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Standard Deduction (New Regime): ₹75,000 for salaried individuals.
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Section 24(b): Interest on home loan:
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Self-occupied property: up to ₹2 lakh (old regime only)
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Let-out property: full interest deduction, regardless of regime.
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Comparison Table: Max Tax-Saving Opportunities
| Instrument / Deduction | Limit | Regime |
|---|---|---|
| Section 80C (ELSS, PPF, etc.) | ₹1.5 lakh | Old |
| Section 80CCD(1B) – NPS extra | ₹50,000 | Old |
| Section 80CCD(2) – Employer NPS | 10–14% of salary (basic + DA) | Both |
| Section 80D – Health Insurance | ₹25,000–₹50,000 | Old |
| Standard Deduction | ₹75,000 | New |
| Home Loan Interest (Let-out) | Unlimited | Both |
Final Tips
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Evaluate old vs new regime: If your total deductions under the old regime exceed benefits of the new regime’s slabs, choosing old may pay off.
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Use NPS (80CCD 1B) to go beyond traditional limits—especially effective when combined with 80C.
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In the new regime, you lose 80C/80D benefits but gain a higher standard deduction and broader tax slabs.
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Save tax while planning long-term: ELSS, PPF, and NPS also help build wealth.
FAQs
Q1: Can I claim both Section 80C and 80CCD(1B)?
Yes. 80C limit of ₹1.5 lakh applies to combined Section 80C/80CCC/80CCD(1), but Section 80CCD(1B) offers an additional ₹50,000 deduction solely for NPS.
Q2: Is ELSS still beneficial if I choose the new tax regime?
Not from a tax-saving perspective—ELSS primarily serves tax deduction purposes under 80C. As the new regime doesn’t allow 80C deductions, many investors are pulling out of ELSS.
Q3: Should I opt for the new regime if my employer offers high NPS contribution?
Potentially—especially if employer NPS contribution (80CCD(2)) plus standard deduction outweigh what you would otherwise save via 80C/80D in old regime.