Tax Deductions for Salaried Employees in India

Tax deductions help salaried employees reduce their taxable income and legally lower the amount of income tax they pay. By claiming eligible deductions under the Income Tax Act, you can significantly increase your in-hand salary.

Common deductions include Section 80C investments, health insurance under Section 80D, home loan interest, HRA exemption, and NPS contributions.

Before choosing deductions, compare the Old vs New Tax Regime to see which option is more beneficial for your salary.

Income Tax Calculator

Calculate your income tax under the Old and New Tax Regime instantly. Compare tax liability and choose the regime that saves you more.

What Are Tax Deductions?

Tax deductions reduce your taxable income, which directly lowers the income tax you pay.

How It Works

Your tax is calculated on taxable income, not your full salary. Eligible deductions are subtracted before tax is applied.

Quick Example

Salary: ₹8,00,000 Deductions claimed: ₹1,50,000 Taxable Income: ₹6,50,000 → You pay tax only on ₹6,50,000 (Old Regime).

Most deductions like 80C, 80D, and HRA are available under the Old Tax Regime. The New Tax Regime has lower tax rates but fewer deductions.

List of Major Tax Deductions Under Old Regime

The Old Tax Regime allows salaried employees to reduce taxable income using the following major deductions:

Section 80C (Investments & EPF)
Section 80D (Health Insurance)
Standard Deduction
HRA Exemption
Section 24(b) – Home Loan Interest
Section 80CCD(1B) – NPS Contribution
Professional Tax

Section 80C (Up to ₹1.5 Lakh)

Covers EPF, PPF, ELSS, Life Insurance Premium, Tax-Saving FD, Sukanya Samriddhi, and principal repayment of home loan. Maximum deduction allowed is ₹1.5 lakh per year.

Section 80D (Health Insurance)

Deduction for medical insurance premiums paid for self, spouse, children, and parents. Higher limits apply for senior citizens.

Standard Deduction

A flat deduction is available to salaried employees before calculating taxable income.

₹50,000 under the Old Tax Regime
₹75,000 under the New Tax Regime

This deduction is automatically applied to your gross salary. No investment or proof submission is required.

Example: If your salary is ₹8,00,000 under the New Regime, your taxable income becomes ₹7,25,000 after applying the ₹75,000 standard deduction.

HRA (House Rent Allowance)

Available if you live in rented accommodation. The exemption depends on salary, rent paid, and city of residence. You can estimate this using the HRA Exemption Calculator.

Section 24(b) – Home Loan Interest

Deduction on interest paid for a home loan on self-occupied property, subject to prescribed limits.

Section 80CCD(1B) – NPS

Additional deduction of up to ₹50,000 for contributions made to the National Pension Scheme (NPS), over and above the 80C limit.

Professional Tax

Professional tax deducted by your employer is allowed as a deduction while calculating taxable income under the Old Tax Regime.

While professional tax reduces your taxable income, contributions like Provident Fund (PF) are covered separately under Section 80C. You can understand how PF is calculated in detail on our PF Calculation in India guide.

Old vs New Regime – Which Allows Deductions?

The key difference between the Old and New Tax Regime is the availability of deductions.

Old Tax Regime

Allows deductions under Section 80C, 80D, 24(b), 80CCD, etc.
Allows HRA exemption
Allows professional tax deduction
Standard Deduction: ₹50,000

New Tax Regime

Lower tax rates
Most deductions not allowed
No 80C, 80D, HRA, or home loan interest deduction
Standard Deduction: ₹75,000

If you actively invest in tax-saving instruments (like EPF, PPF, ELSS, insurance, or NPS), the Old Regime may reduce your tax more.

If you prefer simpler tax filing without investments, the New Regime may be better due to lower slab rates.

Compare both in detail on our Old vs New Tax Regime guide or calculate your exact tax using the Income Tax Calculator.

How Tax Deductions Increase Your In-Hand Salary

Tax deductions reduce your taxable income. When taxable income goes down, the income tax you pay also reduces. Lower tax = higher in-hand salary.

Simple Example

Annual Salary: ₹10,00,000 Standard Deduction (Old Regime): ₹50,000 80C Investments: ₹1,50,000

Total Deductions: ₹2,00,000 Taxable Income: ₹8,00,000

Since tax is calculated on ₹8,00,000 instead of ₹10,00,000, your total tax liability reduces — and the saved amount stays in your bank account as higher take-home pay.

Why This Matters

Lower taxable income
Lower income tax
Higher monthly in-hand salary

Calculate Your In-Hand Salary After Deductions

Use our calculator to see how tax deductions impact your actual take-home salary.

Check Your Take-Home Pay With Deductions

Free · Updated for FY 2025–26

Updated for FY 2025–26 · Salaried employees in India

FAQs on Tax Deductions

Which tax regime allows deductions?

Most major tax deductions like Section 80C, 80D, HRA, and home loan interest are available only under the Old Tax Regime. The New Tax Regime offers lower slab rates but does not allow most deductions.

What is the standard deduction under old and new tax regime?

The standard deduction is ₹50,000 under the Old Tax Regime and ₹75,000 under the New Tax Regime for salaried employees.

Is PF counted under Section 80C?

Yes, the employee's Provident Fund (PF) contribution is eligible for deduction under Section 80C, subject to the overall ₹1.5 lakh annual limit.

Does the new tax regime allow 80C deduction?

No, Section 80C deductions are not allowed under the New Tax Regime. They are available only under the Old Tax Regime.

Can tax deductions increase my in-hand salary?

Yes, tax deductions reduce your taxable income, which lowers your income tax liability and increases your take-home salary.

Do I need proof for all tax deductions?

Some deductions like 80C, 80D, and HRA require proof of investment or expense. However, the standard deduction does not require any proof and is automatically applied.