Smart tax planning is one of the most effective ways for salaried individuals in India to boost their take-home income. The Income Tax Act offers a wide range of deductions and exemptions for investments, expenses, and savings, enabling you to lower your tax liability while securing your financial future.

While popular options like Section 80C are well known, there are also several lesser-used provisions, such as benefits on health insurance premiums or even electric vehicle loans. With thoughtful planning, you can maximise these opportunities.

Let’s uncover the best tax-saving hacks!

What are the Best Tax-Saving Hacks Legally?

Here’s a comprehensive overview of strategies you can use to maximise your tax savings legally:

1. Boost Tax Savings with NPS Contributions (Section 80CCD)

If you are enrolled in the National Pension System (NPS), you can claim deductions under Section 80CCD(1), subject to the overall ceiling of ₹1.5 lakh under Section 80CCE. In addition, an extra deduction of ₹50,000 is available under Section 80CCD(1B). By increasing your NPS contributions, you not only build a retirement corpus but also reduce your taxable income.

2. Tuition Fee Deduction for Parents (Section 80C)

Parents can claim tax deductions on tuition fees paid to recognised schools, colleges, and universities. This benefit is capped at ₹1.5 lakh per financial year, in addition to other Section 80C deductions, including insurance premiums, provident fund contributions, and pension plans. Importantly, this exemption applies to a maximum of two children per taxpayer.

3. Wedding Gifts – Tax-Free Receipts

Weddings in India often involve generous gifting. Gifts received by an individual on their wedding day, whether in the form of cash, cheque, or valuable items, are fully exempt from tax under Section 56(2). This exemption helps newlyweds avoid tax liability on what is often a significant inflow of assets.

4. Gifting or Lending to Adult Children

Passing surplus income or capital gains to adult children can reduce your overall tax burden. Income earned from such gifted funds—whether through dividends, interest, or capital gains—is taxed according to the child’s tax slab, which may be lower. This creates scope for family-level tax efficiency.

5. Routing Investments via Parents

Senior citizens enjoy enhanced tax benefits. If your parents have minimal income, transferring funds to them is a practical tax-saving strategy. You can either gift funds or invest directly in their name, tax-free.

They may then reinvest in senior-friendly schemes such as the Senior Citizens’ Savings Scheme (SCSS) or fixed deposits, allowing your family to make the most of available exemptions.

6. Tax Benefits Through HUF (Hindu Undivided Family)

The Hindu Undivided Family (HUF) is recognised as a separate tax entity for Hindus, Sikhs, Jains, and Buddhists. By allocating income from business or assets to an HUF, families can significantly reduce individual tax liability. Contributions from family members can be pooled into the HUF, and the income generated from these assets is taxed separately.

7. Charitable Donations and Philanthropy

Donations to approved charitable institutions qualify for tax deductions under Section 80G. Depending on the nature of the donation, taxpayers can claim either a 100% or 50% deduction. However, only donations made by cheque, draft, or electronic transfer and cash donations (up to ₹2,000) are eligible.

8. Reimbursement of Telephone and Internet Expenses

Under Rule 3(7)(ix), telephone and internet reimbursements provided by employers are tax-exempt. If your work requires frequent use of mobile or internet services, you are entitled to claim the full cost of usage without tax implications.

9. Health Insurance for Parents (Section 80D)

Medical insurance tax exemption allows for deductions of up to ₹25,000 for both the self and their family. Additionally, premiums paid for parents’ health insurance are deductible up to ₹25,000 if they are under 60 years, and up to ₹50,000 if they are senior citizens. If your parents are uninsured, deductions are available for medical expenses incurred up to ₹50,000 annually.

10. Claiming HRA by Paying Rent to Parents

If you live with your parents, you can still benefit from claiming House Rent Allowance (HRA) by paying them rent. This creates a legitimate rental income stream for them, while you gain the HRA deduction. Parents, as property owners, can also claim a 30% standard deduction on rental income, with the remainder taxed as per their slab.

In the case of joint ownership, the income can be split, resulting in further tax optimisation.

By understanding and utilising available tax-saving provisions, salaried Indians can effectively reduce their taxable income while securing financial well-being. Strategic planning, timely investments, and careful documentation ensure both compliance and maximised benefits, making tax management a smarter, stress-free process.