Top 6 must-know tax hacks for young professionals: Save big with 80C, HRA, NPS & more

If you are a young professional trying to figure out your finances and taxes, it's important to understand which tax regime- old or new suits you better. "The old regime allows you to claim various deductions and exemptions if you have investments and expenses like insurance, home loan interest, or rent. This could help reduce your taxable income. On the other hand, if you prefer a simpler system with fewer deductions and a straightforward tax structure, the new regime might be a better fit," said Avnish Arora, Executive Director, Direct Tax, Forvis Mazars in India

Use section 80C wisely

There are options available, such as ELSS mutual funds, PPF, life insurance, or paying home loan EMIs, where you can claim up to ₹1.5 lakh deduction under Section 80C and reduce your taxable income significantly.

Go beyond section 80C

You must buy health insurance as paying premiums for your health insurance policies can help you claim deductions up to ₹75,000 under Section 80D of the income tax act. These policies will help covering yourself, your family, and even senior citizen parents.

Save tax on house rent allowance

Salaried and self-employed individuals can use HRA exemption under Section 10(13A) and Section 80GG, respectively. HRA helps you save significant amount of tax if you are living in metro cities.

Invest in Tax-Saving FDs and NPS

Apart from Section 80C, you can also invest in 5-year tax-saving fixed deposits and the National Pension System (NPS) to get additional deductions of Rs 50,000 and build long-term wealth efficiently.

Home loan interest rate

Claim full ₹2 lakh deduction under Section 24(b) for interest paid. Under the old tax regime, Section 24(b) of the income tax act allows you to claim a deduction of up to ₹2 lakh per financial year on the interest paid on a home loan for a self-occupied property.

File Your ITR

It is important to file ITR even if you are not legally required to file; doing so helps create a financial record, speeds up refunds, eases loan approvals, and strengthens your future visa applications.