If you are a salaried employee and have already made investments in certain tax-saving instruments, it is imperative that you declare this to your employer so that your salary is not substantially reduced in the last two months of the 2025 financial year.
For example, if you have invested ₹1 lakh for insurance premium and another ₹50,000 in the equity-linked saving plans (ELSS), then you are eligible for income tax exemption for ₹1.50 lakh investments made.
And if you fall in the 30 percent income tax slab, you will save income tax worth Rs 45,000 (30% of Rs 1.5 lakh) + 4 percent tax ( ₹1,800), which adds up to ₹46,800.
However, it is essential to consider the following points to save taxes through investments in tax-saving instruments.
5 important points to consider
I. Tax regime: Exemption from Income Tax (IT) is allowed only in the old tax regime and not in the new regime. Because the new tax regime is the standard regime, you must opt for the old tax regime if you want to claim the tax exemption.
II. Announcement and filing: Your employer will have to deduct a lower TDS (tax deducted at source) on your behalf if you have informed your employer about the investment, and now it’s time to submit proof of those claimed investments.
However, if you do not provide proof of those investments, your employer will invariably deduct the TDS from your salary.
III. Section 80C: Normally, taxpayers are entitled to income tax exemption up to maximum ₹1.5 lakh on investments made under section 80C. These investments include NSC, PPF, ULIP, etc.
IV. NPS: Additionally, NPS subscribers can claim tax deductions of ₹50,000 under NPS (Tier I account) under subsection 80CCD (1B).
V. Change of job: If you have changed jobs during the year, you are required to disclose what income you have already earned during this tax year (2024-2025), as well as what deductions you have previously claimed.
“Some employees end up claiming all the exemptions twice simply because they forget to inform the new employer about the deductions already claimed in the previous job,” says CA Chirag Chauhan, a Mumbai-based charter account.
