How to Save Income Tax FY 2026-27

How much you can save depends first on which regime you are taxed under. For tax year 2026-27 the new-regime slabs are the default, and most deductions are not allowed in it. This page lists the limits we could confirm from the Income-tax Act, 2025. The old section numbers (80C, 80D, 80CCD) now have new ones.

Start With the Regime

Section 202(1) sets the new-regime slabs as the default, and section 202(2) switches off most deductions in that case. Section 156 gives a rebate that makes tax nil up to ₹12,00,000 of income in the new regime (see our zero-tax page). Choosing between regimes depends on your income and your deductions. We do not state which is better because that depends on your own numbers.

Allowed in the New Regime

• Standard deduction: ₹75,000 (or your salary if lower) for a salaried individual taxed under section 202(1) (section 19).
• Employer contribution to the notified pension scheme (NPS): deductible under section 124(1) and 124(2); the limit is 14% of salary for a new-regime taxpayer, whether the employer is the government or another.
• Other Chapter VIII deductions are not allowed except the few named in section 202(2). Professional tax and a loss under house property are also not allowed in this regime.

Allowed Only in the Old Regime

• Standard deduction: ₹50,000 (section 19).
• Section 123 (formerly 80C): up to ₹1,50,000 on the items in Schedule XV.
• Own NPS contribution, section 124(3) (formerly 80CCD(1B)): up to ₹50,000. It cannot also be claimed under section 123 for the same amount (section 124(5)).
• Health insurance, section 126 (formerly 80D): premium up to ₹25,000 for self and family and ₹25,000 for parents, with ₹50,000 each where the person is a senior citizen. Preventive health check-up of ₹5,000 is within these limits. Medical expenditure for a senior citizen is allowed up to ₹50,000.

Employer NPS contribution under section 124(1) and 124(2) is the one pension-related deduction that also works in the new regime. Your own NPS contribution under 124(3) does not.

What Counts Under Section 123 (80C)

Schedule XV of the Act lists the eligible items. A few you may recognise:

• life insurance premium (for a policy issued on or after 1 April 2012, only the premium up to 10% of the sum assured qualifies, with other percentages for certain older or special policies);
• contribution to an employee provident fund or recognised provident fund;
• tuition fees for education in India (not development fees or donations);
• five-year term deposit with a scheduled bank under a notified scheme, and five-year Post Office Time Deposit;
• Senior Citizen Savings Scheme deposits;
• units of notified mutual-fund schemes (ELSS is a common example; see our PPF, ELSS and NPS comparison).

Read the full Schedule XV for conditions before you rely on an item. Housing-loan principal repayment is also in the list.

Side-by-Side

Item	New Regime (default)	Old Regime
Standard deduction (salaried)	₹75,000	₹50,000
Section 123 (80C) limit	Not allowed	₹1,50,000
Own NPS, section 124(3)	Not allowed	₹50,000
Employer NPS, 124(1) and 124(2)	Allowed, up to 14% of salary	Allowed, up to 14% of salary for government employers and 10% for others
Health insurance, section 126	Not allowed	Allowed within the limits above

Before You Invest

• Do not lock money away only for a deduction. Check that the item suits your goals and liquidity.
• If you are in the new regime, section 123 and section 126 investments do not reduce your tax.
• Tell your employer what you want counted so TDS reflects it. See our TDS on salary guide.
• Rules can be amended. Check incometaxindia.gov.in or ask a tax professional.

Sources: limits and the regime rules are from the Income-tax Act, 2025 as amended by the Finance Act, 2026: section 19 (standard deduction), section 123 and Schedule XV (80C), section 124 (NPS), section 126 (health insurance) and section 202 (new regime). The official Schedule XV page was used for the item list. We read the section text on indiacode.ecourtsindia.com, a non-government mirror. Slabs are from the Finance Bill 2026 explanatory memorandum.