Are You a Salaried Individual? Don’t Miss These 5 Income Tax Deductions & Exemptions in 2025

“Tax deductions” reduce your taxable income, whereas “tax exemptions” represent exempt incomes that are not to be included in your total income. Both these options reduce your final income tax liability.
 

In the Income Tax Act, one popular section for saving taxes via deductions is 80C, where you can save up to Rs 1.5 lakhs annually. Under this section, you can make investments in some eligible schemes like the Employees Provident Fund (EPF), Public Provident Fund (PPF), five-year fixed deposits, and Equity Linked Savings Schemes (ELSS). Also, you can claim expenses like insurance premiums and children's tuition fees.
 

While these options are general and apply to all types of taxpayers, there are some specific deductions and exemptions that only apply to salaried individuals like you. In this article, let’s check out the top 5 income tax exemptions for salaried individuals:

• Tax deductions lower your taxable income, while tax exemptions represent income not included in your total income. Both reduce your final tax liability.
• The new tax regime offers a standard deduction of Rs. 75,000, while the old regime allows Rs. 50,000. Pick the tax regime that minimises your tax payment.
• Some top income tax exemptions for salaried individuals are related to HRA, LTA, and relief under Section 89(1) for salary arrears.

The standard deduction is a “fixed amount” that salaried individuals can subtract from their income before calculating tax. It was reintroduced in the 2018 budget to replace the earlier “conveyance” and “medical allowances”.
 

As per the latest announcements made in the Union Budget 2025, the standard deduction under the “new tax regime” is set at Rs. 75,000. While filing income tax returns (ITR) for the financial year 2025-26, taxpayers can directly deduct this amount from their taxable income. However, if you choose the “old tax regime”, the standard deduction remains at Rs. 50,000. This implies that if you are filing your ITR in the old regime, you cannot benefit from the increased deduction amount.
 

Thus, when deciding between the old and new tax regimes, salaried individuals should carefully assess the deductions they can claim under each option. Next, they should calculate their total tax liability for both regimes and choose the one that results in the lowest tax payment.

Sec 10(13A) allows salaried individuals who are living in rented homes to save on taxes. You can reduce your taxable income by claiming HRA, which can be fully or partially exempted from tax. The least of the following limits can be claimed as an HRA exemption:

• Actual HRA provided by your employer
• 50% of your salary (metro-cities) or 40% (non-metro areas)
• Actual rent paid minus 10% of your basic salary and DA (Dearness Allowance).

LTA is a tax benefit that covers travel expenses for trips taken within the country. This income tax exemption for salaried individuals can be claimed once a year for short trips.

To qualify for LTA, you can only travel with your spouse, children, or parents. Also, you must provide original bills or receipts for the travel expenses to claim this benefit.
 

Moreover, it only applies to domestic travel, meaning you can't use it for trips outside India. Some acceptable modes of travel are trains, flights, or public transport.

When you receive past dues in the current year (known as salary arrears), it can increase your total income and push you into a higher tax bracket. In such a situation, you might end up paying more taxes due to these arrears. To help you manage this additional tax burden, Section 89(1) provides income tax exemption for salaried individuals.
 

This section provides relief, and you are not required to pay those additional taxes just because the payment was delayed. 

Section 10(10C) also offers income tax exemptions for salaried individuals. This exemption is related to compensation received when you:

• Voluntarily retire
  or
• Choose to separate from your job
   

In such cases, any compensation you receive is exempt from taxes under Section 10(10C). However, there are some important rules to follow. First, the compensation must comply with rule 2BA. Second, the total amount of compensation you receive must not exceed Rs. 5,00,000 to qualify for this tax exemption.
 

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