Best Tax Saving Investments for Salaried Employees in India (2026)

Tax planning is not just about saving tax—it is about creating long-term financial security while remaining fully compliant with income tax laws. With evolving regulations and the option to choose between the old and new tax regimes, salaried employees in India must adopt a structured approach to tax planning in 2025.

As a trusted tax & regulatory advisory firm offering compliance advisory services, Compliance Craft Advisors Private Limited guides salaried individuals in choosing the right tax saving investments while ensuring complete legal and financial compliance.

Why Tax Planning Is Important for Salaried Employees

Salaried employees have limited scope for tax deductions compared to business owners operating under different types of business entities in India. Smart tax planning helps in:

• Reducing taxable income legally

• Creating long-term wealth

• Avoiding last-minute, unproductive investments

• Ensuring compliance with income tax laws

Professional guidance from tax and compliance experts ensures that tax savings are both effective and compliant.

Best Tax Saving Investments in India 2025-26 (Old Tax Regime)

1. Section 80C Tax Saving Investments

Section 80C allows salaried employees to claim deductions up to ₹1.5 lakh per financial year.

Tax saving options under Section 80C include:

• Employee Provident Fund (EPF)

• Voluntary Provident Fund (VPF)

• Public Provident Fund (PPF)

• Equity Linked Savings Scheme (ELSS)

• Life Insurance Premium

• Tax Saving Fixed Deposit (5-year lock-in)

• Children’s Tuition Fees

These remain the best tax saving investments for salaried employees under the old tax regime and also help in building long-term capital assets, explained in detail here:
What Is a Capital Asset? Meaning, Types & Taxation Explained.

2. ELSS vs PPF – Which Is Better for Tax Saving?

ELSS mutual funds are market-linked investments with a 3-year lock-in period and higher return potential. PPF, on the other hand, is a government-backed investment offering safety and tax-free returns with a 15-year lock-in.

For 2025, a combination of ELSS for growth and PPF for stability is considered an ideal tax planning strategy.

3. National Pension System (NPS)

NPS provides an additional tax deduction of ₹50,000 under Section 80CCD(1B) over and above Section 80C.

Key benefits:

• Long-term retirement planning

• Low-cost investment structure

• Additional tax saving beyond ₹1.5 lakh

NPS is not mandatory but highly recommended for salaried employees.

4. Health Insurance – Section 80D

Salaried employees can claim tax benefits on health insurance premiums under Section 80D.

• Self and family: up to ₹25,000

• Parents: up to ₹25,000 (₹50,000 if parents are senior citizens)

This deduction is an important part of tax saving under income tax beyond Section 80C.

5. Home Loan Tax Benefits

Home loans offer multiple tax benefits:

• Principal repayment under Section 80C (₹1.5 lakh)

• Interest on home loan under Section 24(b) (₹2 lakh)

• Additional deductions for first-time buyers under applicable sections

Home loans are among the most effective income tax saving investments for salaried individuals.

Tax Saving Investments Under the New Tax Regime

Under the new tax regime, most deductions are not available. However, the following benefits can still be claimed:

• Standard deduction of ₹50,000

• Employer’s contribution to NPS under Section 80CCD(2)

• Exemptions on gratuity and leave encashment

Choosing between the old and new tax regimes should be done after professional evaluation by a corporate tax advisory services provider, especially for individuals also managing GST and compliance obligations such as e-invoicing and e-way bills:
E-Invoicing & E-Way Bill Compliance – GST Rules, Workflow & Penalties.

Are Tax Saving Fixed Deposits Better Than Mutual Funds?

Tax saving fixed deposits offer safety and fixed returns but come with taxable interest. ELSS mutual funds, although market-linked, provide better long-term post-tax returns.

The right choice depends on individual risk appetite and financial goals.

Which Tax Saving Investment Gives the Highest Returns?

Historically, ELSS mutual funds have delivered the highest long-term returns among tax saving options. However, returns are subject to market risks.

A diversified investment approach guided by business compliance consultants ensures both returns and regulatory compliance.

How Should Salaried Employees Plan Tax Saving Investments for 2025-26?

• Start tax planning at the beginning of the financial year

• Choose investments aligned with life goals

• Balance equity and debt investments

• Review tax regime selection every year

• Seek guidance from a compliance advisory firm

Frequently Asked Questions (FAQs)

1. What are the best tax saving investments for salaried employees in India?

ELSS, PPF, EPF, NPS, health insurance, and home loan investments are considered the best options.

2. Which tax saving investments are allowed under Section 80C?

ELSS, PPF, EPF, life insurance, tax saving fixed deposits, and tuition fees.

3. Is ELSS better than PPF for tax saving?

ELSS offers higher returns, while PPF provides safety. A combination of both is ideal.

4. How much tax can salaried employees save under Section 80C?

Salaried employees can claim deductions up to ₹1.5 lakh per year.

5. Is NPS mandatory for salaried employees?

No, NPS is optional but offers additional tax benefits.

6. Which tax saving investments are available under the new tax regime?

Standard deduction and employer’s contribution to NPS are allowed.

7. Are tax saving fixed deposits better than mutual funds?

Fixed deposits are safer, while mutual funds offer higher long-term returns.

8. Can salaried employees claim tax benefits on health insurance?

Yes, under Section 80D of the Income Tax Act.

9. Which tax saving investment gives the highest returns?

ELSS mutual funds have historically provided the highest returns.

10. How should salaried employees plan tax saving investments for 2025?

By starting early, diversifying investments, and consulting tax professionals.

Professional Tax & Compliance Advisory Services

If you are looking for the Best CA in Pune or Top CA in Pune, our firm provides:

• Tax planning and tax saving advisory

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Our team of tax and compliance experts delivers reliable compliance management services for individuals and businesses.

Plan your taxes smartly. Save legally. Stay compliant.