Many taxpayers continue to opt for the old tax regime because it allows taxpayers to claim various deductions and exemptions, helping reduce their taxable income, which reduces their overall tax liability.
Nidhi | Jul 2, 2025 |
Pay Almost ZERO Income Tax: Use These Deductions Under the Old Regime
Many taxpayers continue to opt for the old tax regime because it allows taxpayers to claim various deductions and exemptions, helping reduce their taxable income, which reduces their overall tax liability. As of June 30, 2025, around 67 lakh people have already filed and verified their income tax returns (ITRs), mostly using ITR-1 and ITR-4, which are available for online filing.
However, ITR-2 and ITR-3 still cannot be filed online, as they are still unavailable on the portal. This delay might lead to a last-minute rush as the deadline to file returns for the financial year 2024-25 (assessment year 2025-26) is September 15, 2025. If you wait for the end, you might miss out on claiming some tax deductions that you are eligible for. Therefore, it is better to get started early and avoid the last-minute hassle. Let us get familiar with some popular deductions that you can use to reduce your tax liability.
If you are a salaried employee, you may be part of the Employees’ Provident Fund (EPF) scheme. In this scheme, you automatically contribute 12% of your salary to your EPF account, and your employer contributes the same amount. However, only your own contribution can be claimed for a deduction under Section 80C of the Income Tax Act and not your employer’s contribution.
If you want to contribute more, you can do it using the Voluntary Provident Fund (VPF). Just remember that your total yearly contributions to both EPF and VPF cannot be more than your basic salary.
Taxpayers should note that the interest earned on their EPF is no longer completely tax-free. From the financial year 2021-22, if your total annual contributions to EPF and VPF are more than Rs 2.5 lakh, then the interest earned on the extra amount will be taxed. Also, from FY 2020-21, if your employer’s total contributions to EPF, NPS, and the Superannuation Fund are more than Rs 7.5 lakh in a financial year, the income earned on this extra amount will also be taxed.
Equity-Linked Savings Schemes (ELSS) are a type of mutual fund that mainly invests in stocks and has a three-year lock-in period. You can invest in them and claim a tax benefit under Section 80C of the Income Tax Act for up to Rs 1.5 lakh.
Among all the options allowed under Section 80C, ELSS has the shortest lock-in. While you get to claim a deduction for investing in ELSS, it is important to keep in mind that any profit you earn when you redeem your investment is subject to taxation.
You need not submit documents to claim this deduction, but it is best to know the rules and keep your documents ready. Taxpayers should note that the tax deduction for ELSS under Section 80C is allowed only in the year you actually make the investment. If you forget or claim the deduction in the financial year you invested in ELSS, you will lose the tax-saving benefit under 80C for that relevant financial year, and you cannot claim it for the next financial year.
You can claim a tax deduction of up to Rs 1.5 lakh in a financial year under Section 80C by investing in options like Public Provident Fund (PPF) or tax-saving fixed deposits (FDs). PPF has a lock-in period of 15 years, but you can extend it if needed.
Therefore, if you made any PPF investments in FY 2023-24, do not forget to claim them as a deduction under Section 80C. One major benefit of PPF is that it falls under ‘exempt-exempt-exempt‘ (EEE). This means that you get a tax deduction for your investment, plus the interest you earn is tax-free, and the amount you receive at maturity is also exempt from tax.
If you are below 60 years old, you can claim a tax deduction of up to Rs 25,000 for the health insurance premiums you pay for yourself and your spouse and your children and even your parents during the financial year under Section 80D.
You can also get an extra deduction of up to Rs 25,000 if you pay premiums for your parents’ health insurance if they are under 60. If your parents are 60 or older, the deduction limit increases to Rs 50,000. Since FY 2015-16, there has been an additional Rs 5,000 deduction allowed for preventive health checkups, but this amount is part of the overall Rs 25,000 or Rs 50,000 limit, depending on the parents’ age.
If you don’t pay any health insurance premiums for your senior citizen parents, you can still claim up to Rs 50,000 as a deduction for their medical expenses.
Senior citizens can claim a tax deduction of up to Rs 50,000 on interest earned from fixed deposits, savings accounts, and post office deposits. As per an expert, resident individuals aged 60 and above are eligible for this higher deduction under Section 80TTB.
However, if this deduction is claimed, benefits under Section 80TTA cannot be used in the same year. Also, this section applies only to resident individuals, and NRIs are not eligible.
Any interest income that is more than Rs 50,000 is fully taxable as per your income slab. Make sure to report all interest under “Income from Other Sources” in your ITR, even if it does not appear in Form 16, 26AS, or AIS.
Section 80TTA of the Income Tax Act, 1961 allows resident individuals below 60 years of age and Hindu Undivided Families (HUFs) to claim a deduction of up to Rs 10,000 in a financial year. This applies to interest earned from savings accounts in banks, co-operative banks, or post offices. However, this benefit only covers savings account interest, and it does not include interest from fixed or recurring deposits.
The interest earned from savings accounts is taxable according to your income tax slab. But banks do not deduct TDS (Tax Deducted at Source) on savings account interest. So, if your interest income is under the Rs 10,000 limit, make sure to claim the deduction under Section 80TTA.
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