Tax Saving Strategies: CTC up to ₹15 Lakh Tax-Free in FY 2025-26

The Union Budget 2025–26 has introduced several income tax changes, allowing middle-income earners to optimise their take-home pay. Under the updated structure, individuals with a Cost to Company (CTC) of up to ₹15 lakh can potentially bring their tax liability down to zero through strategic use of available exemptions and deductions.

This blog breaks down key sections of the Income Tax Act—across both the old and new regimes—that can be used to reduce taxable income, depending on your salary structure and financial decisions.

Tax slab under the old regime

Here are the income tax slabs under the old regime for FY 2025-26 (AY 2026-27):

Additional Charges:

• Surcharge:

o 10% on income between ₹50 lakh – ₹1 crore o 15% on income between ₹1 crore – ₹2 crore o 25% on income between ₹2 crore – ₹5 crore o 37% on income above ₹5 crore

• Health & Education Cess: 4% on the tax amount

Tax slab under new regime

Here’s the tax slab structure under the new regime for FY 2025-26 (AY 2026-27):

Key Highlights:

• No tax liability up to ₹12 lakh due to an enhanced rebate of ₹60,000.
• The standard deduction for salaried individuals is ₹75,000, making incomes up to ₹12.75 lakh tax-free.

Deductions and Exemptions Available Under the Old Tax Regime

Here are some tax-saving strategies under different sections.

• Section 24(b)
  Section 24(b) provides tax benefits on home loan interest payments. If the property is self-occupied, the deduction limit is ₹2 lakh per financial year. No threshold limit exists for rented properties, but total losses from house property are capped at ₹2 lakh annually.

The deduction applies to loans for a property’s purchase, construction, repair, or renovation. The construction or purchase must be completed within five years to avail the benefit. Additionally, interest paid on a home loan for the pre-construction phase can be claimed as a deduction in five equal annual instalments, beginning in the financial year you take possession of the property.

• Section 80C
  This tax-saving investment section allows individuals and HUFs to claim deductions up to ₹1.5 lakh annually, reducing taxable income. Eligible investments include Public Provident Fund (PPF), Employees’ Provident Fund (EPF), National Savings Certificate (NSC), Sukanya Samriddhi Yojana (SSY), tax-saving fixed deposits, and Equity-Linked Savings Schemes (ELSS).

• Section 80D
  Under Section 80D, you can get deductions on medical insurance premiums and medical expenses. You are eligible for up to ₹25,000 if you pay premiums for yourself, your spouse, and dependent children. If you or the insured is a senior citizen (60+ years), the limit increases to ₹50,000. You can also claim up to ₹50,000 for medical expenses of uninsured senior citizens. Additionally, preventive health check-ups qualify for a ₹5,000 deduction within the overall limit.

• Section 80E
  Under Section 80E, you can claim a tax deduction on the interest paid on education loans taken for higher studies. This benefit applies if the loan is for yourself, your spouse, children, or a student you legally support. You can claim it for up to 8 years, starting from the year you begin repayment. There is no upper limit on the deduction, but it applies only to the interest portion of the loan.

• Section 80G
  Section 80G allows for a deduction for donations made to specified charitable institutions and relief funds. Depending on the organisation, you can get tax benefits of 50% or 100% of the donated sum. However, cash donations exceeding ₹2,000 are not eligible for deduction.

• Section 80DD
  Under Section 80DD, you can claim expenses on the medical treatment, rehabilitation, and care of a dependent with a disability. You are eligible for a deduction of ₹75,000 for disabilities of 40% or more and ₹1,25,000 for severe disabilities of 80% or more. This benefit is available if you are a resident individual or HUF, provided the dependent has not claimed a deduction under Section 80U.

Deductions and exemptions available under the new tax regime

Some of the tax-saving strategies you must be aware of under the new tax regime are as follows:

• Section 80CCD(2)
  Section 80CCD(2) allows a tax deduction on an employer’s contribution to the National Pension System (NPS). The deduction is limited to 10% of salary (basic + DA) for private sector employees and 14% for government employees.

• Section 80CCH
  Section 80CCH is for you if you are enrolled in the Agnipath Scheme. Under this section, the Agniveer’s contribution and the Central Government’s matching contribution to the Agniveer Corpus Fund are fully deductible from taxable income. Additionally, the Seva Nidhi payout, which includes accumulated contributions and interest, is completely tax-exempt under Section 10(12C).

• Section 57(iia)
  Under the new tax regime, you can claim a deduction on family pension income under Section 57(iia). If you are receiving a family pension, you can deduct one-third of the pension amount or ₹15,000, whichever is lower, from your taxable income.

• Section 24(b)
  Under the new tax regime, Section 24(b) deductions are limited compared to the old regime. While interest paid on a home loan for a let-out property can still be claimed without limit, the deduction for self-occupied property, which was ₹2 lakh under the old regime, is unavailable.

Other Benefits

• Under Section 10(10C), if you receive compensation on voluntary retirement, you are eligible for a tax exemption of up to ₹5 lakh.
• Under Section 10(10), your gratuity is fully exempt if you are a government employee. If you are a private employee, your exemption depends on whether the Payment of Gratuity Act covers you.
• Under Section 10(10AA), your leave encashment is fully exempt if you are a government employee, while as a private employee, you are eligible for an exemption up to ₹3 lakh.

Conclusion

With the right mix of exemptions, deductions, and smart planning under both old and new tax regimes, you can reduce or even eliminate your tax liability if your annual CTC is up to ₹15 lakh in FY 2025–26. You can increase your take-home pay and strengthen your financial future by leveraging sections like 80C, 80D, 24(b), and 80CCD(2).

Source:

Cleartax