How to Reduce Tax in the Old Regime?
How to Reduce Tax in the Old Regime?
Smart Ways to Save Tax in FY 2024–25 | AY 2025–26
If you're opting for the old tax regime, you're in luck. This regime offers several options to legally reduce your tax burden by claiming deductions and exemptions.
But the key question is:
“How do I reduce my income tax liability using the old regime?”
This article walks you through effective strategies to lower your tax outgo using available sections of the Income Tax Act.
✅ Understand the Structure of the Old Regime
The old tax regime provides a wide range of exemptions and deductions, including HRA, LTA, 80C, 80D, home loan interest, and more.
| Income Slab | Tax Rate |
| Up to ₹2.5 lakh | Nil |
| ₹2.5 lakh – ₹5 lakh | 5% |
| ₹5 lakh – ₹10 lakh | 20% |
| Above ₹10 lakh | 30% |
You can lower your taxable income by using various tax-saving tools. Here's how:
🧾 1. Maximize Section 80C (₹1.5 Lakh Limit)
You can claim up to ₹1.5 lakh as a deduction by investing or spending on:
• Public Provident Fund (PPF)
• Employee Provident Fund (EPF)
• Tax-saving Fixed Deposits (5-year term)
• Equity-Linked Saving Schemes (ELSS)
• Life Insurance Premiums
• Principal repayment of the home loan
• Tuition fees for up to 2 children
📌 Combining EPF and ELSS can offer both stability and growth while helping save tax.
💉 2. Health Insurance Premium – Section 80D
• ₹25,000 deduction for self, spouse, and children
• ₹50,000 for senior citizen parents
• Maximum deduction allowed: ₹75,000
Also includes preventive health check-ups up to ₹5,000 within the limit.
🏡 3. Claim HRA If You Live on Rent
If you're a salaried employee receiving House Rent Allowance (HRA), you can claim exemption under Section 10(13A). The exemption is based on:
• Actual HRA received
• Rent paid – 10% of basic salary
• 50% (metro) or 40% (non-metro) of basic salary
Keep rent receipts and landlord’s PAN (if rent exceeds ₹1 lakh/year).
🏠 4. Home Loan Interest – Section 24(b)
For self-occupied property:
• Claim up to ₹2 lakh per year on interest paid
If it's let out or deemed to be let out:
• Full interest can be claimed (subject to ₹2L loss set-off cap)
Combine this with 80C for principal repayment and double the benefit.
🎓 5. Education Loan Interest – Section 80E
You can claim full interest paid on education loans for:
• Yourself
• Spouse
• Children
No limit on the amount. Deduction available for up to 8 years from the year of repayment.
🎁 6. Donations – Section 80G
Donations to eligible charitable institutions and government funds are deductible:
• 50% or 100% deduction depending on the type of trust
• Only digital/cheque payments are eligible (cash over ₹2,000 not allowed)
💼 7. Use Business Expense Deductions (If Self-Employed)
Freelancers and business owners can deduct actual expenses like:
• Office rent
• Telephone & internet bills
• Staff salary
• Travel expenses
• Depreciation on equipment
Or opt for presumptive taxation (Section 44AD/44ADA) for simplified filing and reduced tax compliance.
💰 8. Claim Additional NPS Benefit – Section 80CCD(1B)
You can get an extra ₹50,000 deduction over and above 80C by investing in the National Pension System (NPS).
It’s an excellent option for retirement planning + tax saving.
✅ Final Words
The old tax regime gives you a range of deductions and exemptions to significantly reduce your tax liability, provided you plan wisely.
From investments to insurance, loans to donations—there are several legal ways to cut down your taxes without compromising on financial goals.
