In India, you are required to pay “income tax” on the income earned by you. These taxes are calculated as per the provisions of the Income Tax Act, 1961 and vary from individual to individual, based on the applicable tax slabs.

To reduce their tax liability, taxpayers also get the option to claim several deductions and exemptions. Some common tax-saving options are paying insurance premiums, investing in tax-saving mutual funds, contributing to the National Pension Scheme (NPS), taking advantage of home loan deductions, and more.

Most of these options are available under Chapter VI-A of the Income Tax Act and help individuals to reduce their taxable income. In this article, let’s check out the top 6 legal tax-saving options that can reduce your income tax liability in 2025.

• Some of the most used legal tax-saving options in India are Section 80C, 80CCD, 80D, 24, and 80E.
• These sections allow individuals to reduce their taxable income through various investment and expense claims.
• Taxpayers can claim deductions for investments in insurance, NPS, health policies, home loan interest, and education loans in 2025.

Below is a list of some commonly used tax-saving options that can reduce your taxable income:

1. Section 80C

Section 80C applies to individuals and Hindu Undivided Families (HUFs). Under this section, they can claim deductions of up to Rs. 1.5 lakh in a financial year. To do so, it provides various investment options as follows:

2. Section 80CCD

Section 80CCD encourages individuals to save for retirement. It offers tax deductions for contributions made to the:

• National Pension Scheme (NPS)

• Atal Pension Yojana (APY)

This section is divided into two parts:

• 80CCD(1): It covers contributions made by individuals, whether salaried or self-employed, to the NPS.

• 80CCD(2): It applies to contributions made by an employer to the NPS on behalf of their employees.

It must be noted that the benefits of Section 80CCD(1) are available only under the old tax regime, while the benefits of Section 80CCD(2) are available under both old and new tax regimes.

3. Section 80D

Section 80D is a tax-saving option that allows individuals and Hindu Undivided Families (HUFs) to claim deductions for “premiums paid on health insurance” policies during a financial year. This includes not only regular health insurance but also top-up plans and critical illness policies. The significant advantage of Section 80D is that the deductions for medical insurance premiums are in addition to the Rs. 1.5 lakh limit available under Section 80C. However, this section can only be claimed by taxpayers who opt for the old tax regime.

Now, if we talk about the quantum of deduction, it varies as follows:

• For premiums paid for oneself, a spouse, or dependent children, a deduction of up to Rs. 25,000 is allowed.

• If the insured includes senior citizens (60 years and above), the deduction limit increases to Rs. 50,000.

Additionally, taxpayers can claim a deduction of up to Rs. 5,000 for preventive health check-ups.
 

4. Section 24

Section 24 provides three key deductions, which are:

• First, taxpayers can claim a standard deduction of 30% on the NAV of rented properties, regardless of actual expenses incurred.

• Second, for self-occupied properties, borrowers can claim deductions of up to Rs. 2,00,000 on interest paid for home loans.

• Finally, municipal taxes paid on properties can also be deducted from the Gross Annual Value (GAV) to arrive at the Net Annual Value.
   

5. Section 80E

Section 80E is another tax-saving option that allows individuals to claim a tax deduction on the interest paid for education loans taken for higher studies. This deduction applies to loans taken for oneself, a spouse, or children, from:

• Recognised financial institutions

or

• Approved charitable organisations

The deduction is specifically for the interest portion of the loan and not the principal amount. Also, the loans obtained from friends or family members do not qualify.

Now, if we talk about the maximum period, this deduction can only be claimed for a maximum of “eight years”, starting from the year the repayment begins.

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