# How to Save Tax on Salary in FY 2026-27: A Practical Plan > A plan to cut tax on salary in FY 2026-27: pick the right regime, use employer NPS, restructure pay, and claim old-regime deductions in the right order. Source: https://trykosh.com/learn/how-to-save-tax-on-salary Guide - Income tax # How to save tax on salary in FY 2026-27 Most advice on saving tax lists every deduction in the book. The useful question is narrower: which of them still work for you, given the regime you'll end up in? Here is a plan in the order that actually moves the number. Updated 25 October 20266 min readBy the Kosh team On this page[Start with the regime, not the deductions](#start-with-regime)[Levers that work in both regimes](#both-regimes)[Worked example: employer NPS in the new regime](#employer-nps-example)[If the old regime wins for you: use these in order](#old-regime-levers)[The year-round routine](#routine)[What not to do](#what-not-to-do)[FAQs](#faq) ## Start with the regime, not the deductions Since the new regime became the default, the biggest tax decision for a salaried person isn't which investment to buy. It's which regime to file under, because that decides whether any deduction counts at all. In the new regime, taxable income up to INR 12 lakh is tax-free (INR 12.75 lakh of salary after the standard deduction), and almost nothing else can be deducted. In the old regime, deductions count but rates are higher. A INR 20 lakh salary shows how this plays out. With HRA on INR 30,000 a month of rent in Bengaluru, full 80C, INR 50,000 of NPS and INR 50,000 of health insurance for the family and parents, the old regime charges **INR 2,48,040**. The new regime, with none of those deductions, charges **INR 1,92,400**. All that tax planning would leave this person INR 55,640 worse off than doing nothing. Run your own numbers in the [old vs new regime calculator](/tools/old-vs-new-tax-regime-calculator) before anything else, and read the [regime guide](/learn/old-vs-new-tax-regime-fy-2026-27) for the break-even at your salary. ## Levers that work in both regimes These are worth checking whatever regime you choose. - **Employer NPS under 80CCD(2).** If your employer moves part of your pay into your NPS account, up to 14% of basic is deductible in the new regime (10% in the old). It's the single biggest lever left for new-regime filers. It doesn't cost your employer more; it changes how your CTC is split. - **Reimbursements for genuine work expenses.** Money your employer repays against bills for official travel or a work phone isn't your income in either regime. Ask HR what reimbursements your company supports. - **Timing of income.** A bonus is taxed at your marginal rate in the year it's paid. On a INR 15 lakh salary in the new regime, a INR 2 lakh bonus adds INR 32,500 of tax. If you have a choice between taking it in March or April, check which year's slab is lower. The [tax on bonus calculator](/tools/tax-on-bonus-calculator) shows the effect. - **Not losing the standard deduction or rebate by accident.** Interest, freelance income or a debt-fund gain can push you past INR 12 lakh of taxable income and switch off the 87A rebate on your whole salary. Spread such income across years where you can. ## Worked example: employer NPS in the new regime Ananya earns INR 20 lakh with a basic of INR 8 lakh and stays in the new regime. Her tax is **INR 1,92,400**. She asks HR to route 14% of her basic, INR 1,12,000 a year, into NPS as an employer contribution within the same CTC. Her taxable income falls by INR 1,12,000 and her tax drops to **INR 1,69,104**, a saving of INR 23,296 a year. The trade-off: that INR 1,12,000 now sits in NPS, which is largely locked until 60, instead of reaching her bank account. If she was saving for retirement anyway, it's a clear win. If she needs the cash, it isn't. [Free tool**Old vs new regime calculator**Find out which regime leaves you more money this year, and exactly how many more rupees of deductions the old regime would need to catch up.](/tools/old-vs-new-tax-regime-calculator)[Free tool**NPS tax benefit calculator**NPS is one of the few tax breaks left in the new regime. See what your employer's contribution and your own INR 50,000 save under each regime.](/tools/nps-tax-benefit-calculator)[Free tool**Salary breakup calculator**See how a typical Indian employer would split your CTC into basic, HRA, special allowance, PF and gratuity, month by month.](/tools/salary-breakup-calculator)[Free tool**Tax on bonus calculator**Find out how much of a bonus survives tax, and watch out for the INR 12 lakh line, where a modest bonus can lose nearly half to tax.](/tools/tax-on-bonus-calculator)[Free tool**HRA exemption calculator**Work out how much of your house rent allowance is tax-free, which of the three limits applies to you, and how much stays taxable.](/tools/hra-exemption-calculator)[Free tool**80C calculator**Add up what already counts toward 80C, see how much of the INR 1.5 lakh limit is left, and what filling it would save at your slab.](/tools/section-80c-calculator) ## If the old regime wins for you: use these in order Rank deductions by how much they cost you to get. Some come free with the life you already lead; others mean locking up money. Old-regime deductions for salaried people, FY 2026-27 Deduction Limit What it takes Cost to you HRA exemption Formula-based Pay rent and receive HRA None, if you rent anyway Home-loan interest (self-occupied) INR 2 lakh A home loan on a house you live in None, if you'd buy anyway 80C INR 1.5 lakh EPF, PPF, ELSS, insurance, tuition, principal Often already used by EPF and fees 80D health insurance INR 25,000 self; INR 25,000 or INR 50,000 for parents Pay premiums by non-cash mode Cover you should have anyway 80CCD(1B) own NPS INR 50,000 Contribute to NPS Tier I Money locked till 60 80E education-loan interest No cap, 8 years A loan for higher studies None 80G donations Depends on the institution Donate to an eligible body with a receipt The donation Work down the table. HRA and home-loan interest can be large and cost nothing extra. 80D is cover you should buy regardless: see [how much health insurance you need](/learn/how-much-health-insurance-do-i-need). After that, 80C is usually half-filled by EPF; our [80C guide](/learn/section-80c-deductions-guide) covers what to top it up with. NPS under 80CCD(1B) comes last for most people because of the long lock-in, though at the 30% slab it saves INR 15,600 a year. What does a winning old-regime profile look like? Take INR 25 lakh of salary in Mumbai with INR 5 lakh of HRA against INR 50,000 a month of rent, a home loan with INR 2 lakh of interest, full 80C, INR 50,000 of own NPS and INR 75,000 of 80D for the family and senior parents. The old regime charges INR 2,65,200 against the new regime's INR 3,19,800. Take away the home loan and the new regime wins again. Large rent and a home loan together are usually what it takes. ## The year-round routine 1. **April:** compare regimes on this year's expected salary and deductions. Tell your employer your regime and declare rent and investments. 2. **April to March:** invest monthly rather than in a March rush. A PPF deposit or an ELSS SIP from April means no last-minute product shopping. 3. **When you change jobs:** give your new employer your previous employer's salary and TDS, so the new one deducts enough. Otherwise each assumes it's your only income and you'll owe tax at filing. 4. **January to February:** submit rent receipts, investment proofs, insurance and loan certificates to HR. 5. **By 31 March:** last day for the year's old-regime investments. 6. **June to July:** check Form 16 against your AIS, then file by 31 July. Anything missed with the employer can still be claimed in the return. See [how to file ITR](/learn/how-to-file-itr-salaried). ## What not to do - **Buy insurance to save tax.** An endowment policy bought for 80C can lock you into low returns for 15 or 20 years. Term cover plus a separate investment is almost always cheaper. - **Chase a deduction that only exists in a regime you won't use.** - **Claim what you don't pay.** Rent you don't pay, donations you didn't make or a parent's "rent" that never moves are found when the department matches PANs and bank records. Penalties for under-reporting are far bigger than the tax saved. - **Forget the money after the tax is saved.** A deduction is worth only your slab rate. A INR 1 lakh investment that saves INR 31,200 but earns poorly for 15 years may not be a good trade. **Where Kosh fits** Kosh works out your tax under both regimes from your actual salary slips, rent and investments, shows how much more in deductions the old regime would need, and reminds you before proofs and the 31 March cut-off. ## Frequently asked questions How can I save tax on salary in the new regime? The main lever is employer NPS under 80CCD(2): up to 14% of basic routed into NPS is deductible. Reimbursements for genuine official expenses aren't income either. Beyond that, keep taxable income at or under INR 12 lakh where you can, because the 87A rebate then makes the tax nil. Which deductions are allowed for salaried employees in the old regime? The INR 50,000 standard deduction, HRA exemption, 80C up to INR 1.5 lakh, your own NPS up to INR 50,000 under 80CCD(1B), 80D health insurance, home-loan interest up to INR 2 lakh on a self-occupied home, education-loan interest under 80E, eligible donations under 80G and professional tax. Is it too late to save tax in March? For the old regime, investments made by 31 March still count for that year, so you can top up 80C or pay a health premium. But last-minute buying often leads to unsuitable products. In the new regime, March investments don't change the tax at all. Does employer NPS reduce my take-home salary? Yes. The employer contribution comes out of your CTC, so less reaches your bank account each month, but it builds your NPS retirement balance and reduces your tax. It suits people who would save that money for retirement anyway. Should I restructure my salary to save tax? Ask HR for options such as employer NPS and reimbursements for work expenses, which help in either regime. Allowances like HRA only help in the old regime. Compare your tax and take-home in both versions before changing anything. ## Sources - [Income Tax Department](https://www.incometax.gov.in/) - [PFRDA (NPS)](https://www.pfrda.org.in/) Written by the Kosh team and checked against the rules in force on 25 October 2026. This guide is general information, not tax, legal or investment advice. Kosh is an educational financial planning tool by Primedepth Labs. It is not a SEBI-registered investment adviser and does not offer personalised investment advice, hold your money or execute trades. Markets carry risk; read scheme documents carefully and consult a registered adviser before acting. ## Upload your statement and Kosh does this for you. Kosh reads your bank and card statements, works out your tax under both regimes and turns guides like this one into your own numbers and next steps. 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