There is a fundamental difference between filing a return and planning your tax, and most people only ever do the first. They reach July, discover what they owe, and pay it. By that point the financial year is closed and almost every lever that could have reduced the liability has already been given up.
Tax planning is the work you do during the year, while the decisions are still live. This guide sets out what those levers actually are - and the single choice that determines whether any of them are available to you at all.
First: the regime choice governs everything
Before discussing any deduction, be clear about this, because it is the point most tax-saving advice quietly omits.
The new tax regime is now the default, and under it, most of the popular deductions - Section 80C, Section 80D, HRA, home loan interest on a self-occupied property - are not available. It offers lower slab rates and a higher standard deduction for salaried individuals instead.
So the strategies below are largely strategies for taxpayers who have consciously opted for the old regime. If you are on the new regime, filling your Section 80C limit will not reduce your tax at all. The planning question is not "how do I maximise 80C" - it is "which regime leaves me better off, given what I can genuinely claim?"
Reactive filing versus planning
| Reactive filing | Tax planning | |
|---|---|---|
| When the work happens | After the year has closed, at filing time | During the financial year, while decisions are open |
| Regime choice | Whatever the default leaves you with | Chosen deliberately, after comparing both |
| Investments | Rushed in March, if at all | Spread through the year, chosen on merit |
| Documentation | Reconstructed under time pressure | Collected as you go |
| What you can still change | Almost nothing | Nearly everything |
The levers, for old-regime taxpayers
Section 80C, up to Rs 1.5 lakh. This covers EPF and PPF contributions, ELSS, life insurance premiums, the principal repayment on a home loan, and children's tuition fees. Note how much of it you may already be filling without doing anything - your EPF contribution and your home loan principal both count. Work out what is already committed before investing more to reach the cap.
Section 80D, for health insurance. Premiums for yourself, your spouse, and dependent children are deductible up to a limit, with a separate additional limit for premiums paid for your parents. The limit is higher where the person insured is a senior citizen. It is worth stating plainly: these are two limits - self and family, and parents - not an unlimited stack of per-person allowances.
Section 80CCD(1B), for NPS. An additional deduction of up to Rs 50,000 for contributions to the National Pension System, over and above the Section 80C ceiling.
HRA, if you pay rent. The exemption is not a flat percentage of salary. It is the least of three amounts: the actual HRA received; rent paid in excess of 10% of salary; and 50% of salary in metro cities or 40% elsewhere. Whichever of those three is smallest is your exemption.
Section 24(b), for home loan interest. Up to Rs 2 lakh a year on interest for a self-occupied property.
Timing is a lever in itself
Two returns can be identical in substance and different in tax simply because of when things happened.
- Invest early in the year, not in March. A March scramble into whatever product is available is how people end up in poorly-chosen insurance policies with long lock-ins. The same rupee invested in April has a full year of growth behind it and was chosen without a deadline in the room.
- Pay your advance tax on schedule. Interest under Sections 234B and 234C accrues on shortfalls in advance tax. This is avoidable interest - it is a pure penalty for poor timing, and it is one of the most common unnecessary costs on a return.
- Book business expenses within the year they belong to. An expense incurred and evidenced before the year ends is deductible in that year; one dated afterwards is not.
- Harvest capital losses deliberately. Losses can be set off against gains under the rules that apply to each head, and carried forward - but only if you file your return by the due date. Filing late forfeits the carry-forward.
Where planning goes wrong
- Investing for the deduction rather than the asset. A bad investment with a tax break is still a bad investment. The deduction is a discount, not a reason.
- Claiming HRA without the substantiation. If you claim it, you need the rent actually paid and the supporting evidence - a rent agreement, receipts, and the landlord's PAN where the rent crosses the specified threshold.
- Chasing 80C while on the new regime. As above: the deduction simply is not available, and the investment does nothing for your tax.
- Ignoring the AIS. Your Annual Information Statement shows what the department already knows about your income. Planning that does not reconcile with it is not planning; it is exposure.
- Leaving the regime choice to inertia. The new regime applies by default. Ending up on it without having compared is not a decision - it is a decision made for you.
Frequently Asked Questions
Can I claim Section 80C under the new tax regime?
No. Section 80C and most other popular deductions are unavailable under the new regime, which offers lower slab rates and a higher standard deduction for salaried individuals instead. This is why the regime comparison must come before any tax-saving investment.
How is the HRA exemption actually calculated?
It is the least of three amounts: the actual HRA you receive; the rent you pay in excess of 10% of salary; and 50% of salary if you live in a metro city, or 40% otherwise. It is not a flat percentage of your salary.
How much can I claim for health insurance under Section 80D?
There is a limit for premiums covering yourself, your spouse, and dependent children, and a separate additional limit for premiums paid for your parents. The applicable limit is higher where the insured person is a senior citizen. Confirm the current figures before you plan around them.
When should I make my tax-saving investments?
Early in the financial year, not in March. A deadline-driven investment is chosen under pressure, and a full year of growth is lost by waiting.
Can salaried taxpayers switch regimes each year?
Salaried individuals without business income can generally choose their regime each financial year. Taxpayers with business income face restrictions on switching back once they have opted out.
Plan the year with Regikart
The gap between a planned tax position and a reactive one is not a matter of clever tricks - it is a matter of making the regime choice deliberately and acting while the year is still open. Both are far easier with someone who does this every day.
Regikart's Chartered Accountants run the regime comparison on your actual numbers, map out what you can genuinely claim, and handle your income tax filing when the year closes. If you are self-employed, our guide to presumptive taxation under 44AD and 44ADA is a useful companion. With offices in Kolkata, Delhi, Gurugram, and Pune, we work with clients across India. Speak to us early in the year, when it still counts.
About the author
Suresh Iyer
Direct Tax Advisor at Regikart. Want to discuss this in the context of your business?
