The Union Budget 2026 has made one thing very clear, the government wants to make things simple. From April 1, 2026, the New Tax Regime is the default choice. However, for those who still want to use the Old Tax Regime to save tax through investments like LIC, PPF, or Home Loans, that door is still open. This article will show you exactly where to put your money to keep more of your hard-earned salary.

The Big Decision (New vs. Old)

Before you invest a single rupee, you must answer one question: Which regime are you choosing?

The New Tax Regime (The Automatic Choice)

• Who is it for? People who want to keep things simple and don't have many investments.

• The Benefit: Lower tax rates. In fact, if you earn up to ₹12.75 Lakh, you pay Zero Tax.

• The Catch: You cannot claim most deductions like LIC, PPF, or Rent (HRA).

The Old Tax Regime (The Saver's Choice)

• Who is it for? People who have big home loans, pay high rent, or want to save specifically for their future using tax-saving schemes.

• The Benefit: You can hide a large part of your salary from the taxman using investments.

• The Catch: The tax rates are higher, and you have to submit lots of proofs/receipts.

Simple Rule of Thumb: If your total investments (PPF, LIC, Rent, Home Loan) are more than ₹4.25 Lakh, the Old Regime is usually better. If they are less, stick to the New Regime.

Best Tax-Saving Options (Section 80C)

Section 80C is the King of tax saving. It allows you to reduce your taxable income by up to ₹1.5 Lakh every year. Here are the best places to put that money:

1. ELSS (Equity Linked Savings Scheme)

• What it is: A mutual fund that invests in the stock market.

• Why it's great: It has the shortest lock-in period (only 3 years). It also has the potential to give the highest returns (12–15%) over time.

• Risk: Medium to High (since it's linked to the stock market).

2. PPF (Public Provident Fund)

• What it is: A 15-year government-backed savings account.

• Why it's great: It is 100% safe. The interest you earn is tax-free. It follows the EEE rule (Exempt, Exempt, Exempt) you save tax when you invest, when you earn interest, and when you withdraw.

• Risk: Zero (Government Guaranteed).

3. Sukanya Samriddhi Yojana (SSY)

• What it is: A special savings scheme for parents with a girl child (below 10 years).

• Why it's great: It offers one of the highest interest rates among all government schemes. Like PPF, it is also completely tax-free.

• Risk: Zero.

4. Life Insurance Premiums

• What it is: Money you pay for your Term Insurance or Life Policy.

• Why it's great: It protects your family and saves tax at the same time. Make sure you buy a Term Plan for maximum protection at a low cost.

5. Home Loan Principal

• What it is: The principal part of your EMI.

• Why it's great: You don't have to invest extra money. The EMI you are already paying for your house helps you save tax under Section 80C.

Beyond the ₹1.5 Lakh Limit (The Extra Savings)

Most people stop at ₹1.5 Lakh, but you can save much more if you know these sections:

1. NPS (National Pension System) - Section 80CCD(1B)

• The Boost: You can save an additional ₹50,000 over and above the ₹1.5 Lakh limit.

• Benefit: This is specifically for retirement. It's a mix of safe debt and stock market growth.

2. Health Insurance - Section 80D

• The Benefit: You can save tax on the premium you pay for health insurance.

• Limits:  ₹25,000 for yourself/family. Extra ₹50,000 if you buy insurance for your senior citizen parents.

• Tip: Even a simple Preventive Health Check-up can save you ₹5,000 in tax here.

3. Home Loan Interest - Section 24(b)

• The Benefit: If you have a home loan for a house you live in, you can deduct up to ₹2 Lakh from your income just for the interest you pay.

Quick Comparison Table 2026

Step-by-Step Strategy for 2026

To maximize your savings without feeling the pinch at the end of the year, follow these three steps:

1. Check your Mandatory Savings: Look at your salary slip for EPF (Employee Provident Fund) and your Home Loan EMI. These might already be covering a large part of your ₹1.5 Lakh limit.

2. Fill the Gaps with ELSS/PPF: If you still have space in the ₹1.5 Lakh limit, put money in ELSS (if you are young and want growth) or PPF (if you want safety).

3. Don't Ignore Health: Buy a good Health Insurance policy. It saves tax today and saves your entire life savings if someone gets sick tomorrow.

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Frequently Asked Questions (FAQs)