Investment Options That Will Save Tax – The Ultimate Guide (2026)
Employees need to make an informed decision from the investment options they have. They need to know what is best for them. Quikchex makes the life of employees easier by automatically computing the most optimized tax election structure for all employees at the time of running payroll. While processing salaries we compute the tax structure with the lowest TDS liability, so that employees are able to maximize their net take-home.
Key Income Tax changes in the Union Budget 2026
- CBDT has notified key tax exemption changes effective April 2026 (Tax Year 2026–27).
- HRA exemption (Old Regime only) expanded to include Bengaluru, Hyderabad, Pune, Ahmedabad with 50% limit (earlier 40%).
- Additional HRA conditions introduced: rent agreement, receipts, landlord PAN (>₹1 lakh), relationship disclosure mandatory.
- Rent paid to relatives will be closely scrutinized; payment through banking channels preferred.
- Children Education Allowance (Old Regime only) increased from ₹100 to ₹3,000 per month per child (max 2 children).
- Hostel Allowance increased from ₹200 to ₹9,000 per month per child.
- Vehicle reimbursement limits enhanced (up to ₹5,000–₹7,000 for cars; ₹3,000 for driver).
- Meal allowance increased significantly from ₹2,200 to ₹8,800 per month (both regimes).
- Overall, exemptions are enhanced but documentation and compliance requirements are stricter.
Income Tax slabs rates for Tax Year 2026-27 (Old & New)
| Income Range (₹) | Tax Rate |
|---|
Investment Guideline followed as per New Tax Regime
| Particulars | Eligibility / Coverage | Amount of deduction | Proofs to be submitted during actual submission |
|---|---|---|---|
| Deduction in respect of contribution to pension scheme of Central Government – u/s 80CCD (2) | Tax deductions for contribution to the pension schemes notified by Central Government, National Pension Scheme (NPS) | The amount of deduction cannot exceed 10% of Basic amount | Since this is employer contribution no proof is required. |
Investment Guideline followed as per OLD Tax Regime
Are too many deductions in your salary eating into your take-home package? If you’re looking for investment options that will save tax while and make sure you’re invested wisely, then this guide is for you.
The table below contains a list of 32 investment options that will reduce your taxable income and in turn the tax you pay. You may choose a combination that works best for you.
Points to consider while submitting Employee Investments Declaration for a current financial year:
- Employees can claim income tax benefits under Section 80G for donations through their personal income tax filings. However, the company does not provide any benefit for 80G under income tax deductions.
- To avail of the HRA exemption, employees must submit the required supporting documents as listed below. Failure to provide these documents will result in the HRA exemption benefit not being considered:
- a) Original monthly rent receipts with a revenue stamp affixed.
- b) A copy of the leave and license agreement, which must be either notarized or registered. Employees must ensure that the agreement covers the relevant financial year.
- If the agreement period is for 11 months (e.g., from July 2024 to May 2025), the employee will receive the HRA exemption benefit only for the period from April 2025 to May 2025.
- To claim HRA exemption from June 2026 to March 2027, the employee must submit the rent agreement covering that period as well.c) For rent payments exceeding ₹8,333 per month (or ₹1 lakh annually), employees must provide a copy of their landlord’s Permanent Account Number (PAN) along with the rent receipts and agreement. Failure to provide the PAN will result in ineligibility for the HRA exemption.d) For rent payments exceeding ₹50,000 per month, Form 26QC is mandatory as proof of tax deduction.
Effective January 2025 onwards, employees who fail to pay the applicable tax on rent amounts above ₹50,000 per month will receive notices from the Income Tax authorities. These notices will require proof of tax payment, transaction records of the rent payments, and a copy of the rent agreement.
Tax Deductions Table for Tax Year 2026-27
Tax Deduction Guide FY 2026-27
Select a deduction type from the dropdown to view eligibility, limit and required proofs.
Note: DONATIONS can be claimed as a deduction at the time of filing Individual Income Tax return. It cannot be claimed through your Salary Income while computing tax with employer.
We hope you can use the investment options above to plan your investment more efficiently. Here are some additional tips that you can use:
Section 80C
Section 80C is probably the most used set of investment options that people use for tax planning. Invest in any of the following up to a maximum of ₹1.5 lakhs p.a. each.
- Life Insurance
- Public Provident Fund
- National Savings Certificate
- Equity Linked Savings Schemes
House Rent Allowance
If you pay rent you should definitely claim its tax benefits. The tax deduction you can claim with HRA is the minimum of the following:
1.Actual HRA received
2. Rent Paid in excess of 10% of (Basic + DA)
3. 40% or 50% of (Basic + DA) based on class of city