Best Tax-Saving Investments for FY 2025–26 in India

As we are in financial year 2025-26, many Indians look to optimize tax savings while growing their wealth. With options ranging from ELSS and PPF to NPS, health insurance, and more, understanding which tools work best for your financial goals can be overwhelming. We also need to look the old tax regime and new tax regime while making investments and saving income tax. In this fully updated guide for Best Tax-Saving Investments for FY 2025–26, you’ll understand various options to save income tax using old and new tax regime.

Table of Contents

Understanding the Tax Landscape & FY 2025-26 Key Updates
New Tax Regime – No Tax up to 16 Lakh Video
New Tax Regime Investment Options to Save Income Tax
Section 80C Investments (Up to ₹1.5 Lakh)
Section 80CCD(1B), 80CCD(2) — NPS for Retirement & Extra Deduction
Section 80D & Other Deductions (Beyond 80C)
Side-by-Side Comparison Table of All Investments
Sample Portfolios Based on Age & Risk Profile
Case Study: ₹10 Lakh Salary—Maximizing ₹2.25 L Deduction
Frequently Asked Questions
Conclusion

Understanding the Tax Landscape & FY 2025-26 Key Updates

New Regime now offers zero income tax up to ₹12 lakh/year income. Yet investment still adds value beyond tax-saving — for wealth, security, retirement.
TDS limits doubled on interest for senior citizens (₹1 lakh from previous ₹50 k) — relevant for FD, SCSS investors.
Budget extended time limit for ITR corrections to 4 years — helpful to update tax planning retrospectives.

New Tax Regime – No Tax up to 16 Lakh Video

Watch more Videos on YouTube Channel

New Tax Regime Investment Options to Save Income Tax

Before moving towards the list of Investment options, we will see which of them and other deductions will be allowed in new tax regime, since new regime is the one with low tax slab rates:

Standard Deduction of Rs. 75,000 available for salaried employees
Deduction for employer’s contribution in NPS Account under Section 80CCD(2)
Home Loan Interest amount under Section 24 in case of let-out property
Deduction of amount paid or deposited in Agniveer Corpus Fund under Section 80CCH(2)
Transport allowance can be claimed in case of specially-abled person
Conveyance allowance for employees received to meet conveyance expenditures
Compensation received for cost of travel or tour
Daily Allowance received as compensation for cost of living in some other place compared to regular place of working
Gifts up to Rs. 5000
Exemption on voluntary retirement 10(10C), gratuity u/s 10(10) and Leave encashment u/s 10(10AA)

Above are the options available to save income tax with new tax regime, no other deductions are applicable when you select new tax regime.

Let us now discuss the list of Investment options mostly available with old tax regime.

Section 80C Investments (Up to ₹1.5 Lakh)

🟢 ELSS (Equity Linked Savings Scheme)

Lock-in: 3 years (shortest under 80C), great liquidity
Returns: Historically 10–15% p.a. – potential to beat inflation if held for long term
Tax treatment: Long Term Capital Gains (LTCG) above ₹1.25 lakh taxed at 12.5%
Pros: Highest growth potential, SIP or lump-sum flexibility
Cons: Market risk, not ideal for risk-averse investors
Tip: Beginning-of-year investing avoids last-minute rush Jan–Mar crowding

🟢 PPF (Public Provident Fund)

Lock-in: 15 years (extendable)
Returns: 7.1% compounding annually; fully tax-exempt (EEE)
Pros: Government-backed safety, partial withdrawals from year 7, loan facility available
Cons: Long lock-in, low returns compared to equities

🟢 NSC (National Savings Certificate)

Lock-in: 5 years
Returns: 7.7%; interest is taxable but eligible under 80C if reinvested
Pros: Government guarantee, ideal for conservative investors
Cons: No liquidity, TDS on interest

🟢 Tax-Saver Fixed Deposits (FDs)

Lock-in: 5 years
Returns: ~6–9%; senior citizen small finance banks may offer up to 9.1% (e.g., Suryoday SFB)
Pros: Fixed return, simple, low risk
Cons: Interest taxable; inflation may reduce real return

🟢 SCSS (Senior Citizen Savings Scheme)

Eligibility: Age ≥ 60 years
Lock-in: 5 years (extendable)
Returns: 8.2% p.a.; quarterly payout
Pros: Excellent for post-retirement income, safe, government-backed
Cons: Interest above ₹1 lakh taxable; cap ₹30 lakh investment

🟢 Sukanya Samriddhi Yojana (SSY)

Eligibility: Girl child <10 years
Lock-in: Until daughter turns 21 or marries (after 18)
Returns: 8.2%, tax-exempt (EEE)
Pros: Safe for long-term goals like higher education or marriage
Cons: Long horizon, specific to daughters

🟢 EPF (Employees’ Provident Fund)

Mandatory: 12% of basic salary contribution by employee + employer
Returns: 8–8.5% (tax-free if >5-year tenure)
Pros: Automatic deduction, employer contribution counts under 80C
Cons: Only for salaried employees, lower liquidity before retirement

🟢 ULIPs (Unit Linked Insurance Plans)

Lock-in: 5 years
Returns: Market-linked; partial switching allowed
Tax: Death benefit & maturity exempt under Sec 10(10D) if norms met
Pros: Combines life cover + investment flexibility
Cons: High charges; returns depend on market; complex structure

🟢 Life Insurance Premiums

Tax: Premiums up to 10% of sum assured qualify under 80C, maturity also tax-exempt under 10(10D) if conditions met
Use-case: Essential for risk coverage; combine term plans with separate investments for clarity

🟢 Education Fees & Tuition (for up to 2 children)

Tax Benefit: Deduction under 80C for tuition fees of full-time education in India
Note: Only tuition; not uniforms, books, transport

Section 80CCD(1B), 80CCD(2) — NPS for Retirement & Extra Deduction

🟢 National Pension System (NPS)

Section 80CCD(1): Part of ₹1.5 L limit
Section 80CCD(1B): Additional ₹50,000 deduction—exclusive only to NPS
Section 80CCD(2): Employer contributions (10–14% salary) are also deductible (exempt even under new regime)
Returns: Market-linked; approx. 8–12% p.a. depending on equity/debt mix; 60% corpus withdrawal tax-free, annuity for rest
Pros: Great for long-term retirement, tax deduction, flexibility in investment allocation
Cons: Locked until age 60; annuity rules

Section 80D & Other Deductions (Beyond 80C)

🟢 Health Insurance (Section 80D)

Up to ₹25,000 for self + family
Additional ₹25,000 for parents <60; ₹50,000 if parents ≥60
Also includes premium for critical illness, preventive health check-ups (max ₹5,000)
Tip: Buy before March 31 for FY benefit

🟢 Home Loan Interest & Principal

Principal: Under 80C (up to ₹1.5 lakh)
Interest: Section 24(b) up to ₹2 lakh (self-occupied); extra ₹50k under 80EE/80EEA for first-time buyers

🟢 Education Loan Interest (Section 80E)

Deduction for interest paid; no upper limit; valid for 8 years

🟢 House Rent Allowance (HRA, Sec 10(13A))

Deduction based on rent paid vs salary components; especially useful for those living in rented accommodation

🟢 Interest on Savings (80TTA / 80TTB)

80TTA: Deduction up to ₹10,000 on interest from savings accounts for non-senior citizens
80TTB: Up to ₹50,000 for senior citizens (includes deposit interest)

🟢 Donations & Disability Relief

80G: Donations to approved charities (50% or 100%)
80DD/80DDB/U: Deduction for mental disability (up to ₹75k or ₹1.25L), specified illnesses, general disability

🟢 HUF Structure

HUF (Hindu Undivided Family) income and investments are taxed separately; can be leveraged for tax efficiency in families with ancestral property/assets

Side-by-Side Comparison Table of All Investments

Instrument	Section	Max Deduction	Lock-in	Approx Return	Risk	Liquidity
ELSS	80C	₹1.5L	3 yrs	10–15% p.a.	High	Moderate
PPF	80C	₹1.5L	15 yrs	~7.1%	Very Low	Very Low
NSC	80C	₹1.5L	5 yrs	~7.7%	Low	Low
Tax-saving FD	80C	₹1.5L	5 yrs	6–9%	Low	None
SCSS	80C	₹1.5L¹	5 yrs	~8.2%	Very Low	Low
SSY	80C	₹1.5L	Until daughter 21	~8.2%	Very Low	Very Low
EPF	80C	₹1.5L	Until retirement	~8–8.5%	Low	Low
ULIP	80C	₹1.5L	5 yrs	Market-linked	Moderate–High	Low
Life Insurance	80C / 10(10D)	₹1.5L	–	–	Low	N/A
NPS	80CCD(1B)	₹2L total	Until 60 yrs	~8–12%	Moderate	None
Health Insurance	80D	₹25–₹75k	Annual	N/A	N/A	N/A
Home Loan (interest)	24(b)/80C/80EE	₹2.5L total	Varies	N/A	N/A	N/A

SCSS deductible under 80C within existing ₹1.5 L limit; max ₹30 L total investment can be made

Sample Portfolios Based on Age & Risk Profile

👶 Young (20–35 yrs), High Growth

ELSS ₹1.0L via SIP (80C)
NPS Tier I ₹50k (80CCD(1B))
Budget health insurance ₹15k (80D)
EPF contributions auto deduction
Why: High equity exposure, early compounding, retirement cushion

👨‍👩‍👧 Middle-aged (35–55 yrs), Moderate Growth + Safety

ELSS ₹50k + PPF ₹50k (80C)
NPS ₹50k
Health insurance ₹25k + parents ₹25k (80D)
Home loan interest claim ₹2L (if applicable)
Why: Balanced risk, mid/long-term planning, family protection

👵 Senior Citizens (55+ yrs), Low Risk + Income

SCSS ₹15L
PPF ₹1.5L (if still eligible)
NPS ₹50k (if not locked earlier)
Health insurance ₹50k (self + parents)
Tax-saving FD ₹2L
Why: Income, tax efficiency, low risk, liquidity for medical

Case Study: ₹10 Lakh Salary—Maximizing ₹2.25 L Deduction

Scenario: Salaried person, age ~30, ₹10 L annual income, wants ₹2.25 L deduction

ELSS via SIP ₹80k → growth potential (+ tax saving)
PPF ₹50k → safe long-term reserve
NPS ₹50k → extra ₹50k deduction
Health insurance ₹15k → covers self + family
Employer EPF ₹1.2 L included, interest tax-free
Result: ₹1.85 L under 80C+80CCD + ₹15k under 80D → ~₹2 L deductions

Tax saved: ~₹60k–₹70k depending on slab; plus long-term wealth building. With new tax regime, no income tax to be paid without any investments.

Frequently Asked Questions

Q1. What’s the best tax-saving investment for FY 2025-26?
Answer: Depends on your profile. ELSS for maximum growth, PPF or SCSS for safety, NPS for retirement + extra ₹50k deduction.

Q2. Can I invest in multiple instruments and still claim full ₹1.5 L?
Yes—you can split across PPF, ELSS, NSC, FD, ULIPs, SSY, EPF, etc., up to ₹1.5 L combined under 80C.

Q3. Should I switch to new tax regime?
Even under new regime (No Tax up to ₹12 L), investing in NPS, PPF, health insurance, and retirement tools still adds wealth & protection even without deduction—don’t drop proven tools if you can afford to invest.

Q4. When should I invest to maximize returns?
Start early (April–June) to benefit from rupee-cost averaging, market cycles, and avoid Q4 rush.

Q5. What happens to PPF after 15 years?
You can withdraw fully or extend in 5-year blocks. Loans allowed after year 3, partial withdrawal after year 7.

Q6. How to choose between SCSS vs FD for seniors?
SCSS offers ~8.2% (govt-backed) vs FD up to 7.5%; choose based on liquidity and comfort with small-bank deposits.

Conclusion

Fully utilize ₹1.5 L under Section 80C with a smart mix suited to your risk & goals
Add NPS ₹50k extra for retirement & additional deductions
Secure health insurance—tax benefit + family protection
Combine instruments—ELSS for growth, PPF/SCSS for safety, ULIP/life-insurance for cover
Plan early, not only in March—rupee-cost averaging matters

Some more Reading:

Save Home Loan Interest Amount!

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Income Tax Calculator App – FinCalC

For Income Tax Calculation on your mobile device, you can Download my Android App “FinCalC” which I have developed for you to make your income tax calculation easy.

What you can do with this mobile App?

Calculate Income Tax for new FY 2024-25 and previous FY 2023-24
Enter estimated Investments to check income tax with Old and New Tax Regime
Save income tax details and track regularly
Know how much to invest more to save income tax
More calculators including PPF, SIP returns, Savings account interest and lot more

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