Tax Saving Options for Salaried Employees and How to File Your ITR in 2026

Tax Saving Options for Salaried Employees and How to File Your ITR in 2026

Description: Explore tax saving options for salaried employees and learn how to file your ITR correctly for AY 2026-27, including regime choice and deadlines.

Every salaried employee eventually asks the same question: old regime or new, and does it even matter? It does, and getting this choice right, along with filing correctly, can be the difference between a smooth refund and a notice from the tax department.

Old Regime vs New Regime: The Decision That Shapes Everything Else

The new tax regime is now the default. If you want the old regime instead, you simply select it while filing your ITR each year — no separate form is needed for salaried individuals with no business income. This single choice determines which deductions you can claim, so it’s worth making deliberately rather than by default.

Tax-Saving Options If You Choose the Old Regime

The old regime rewards active tax planning through several key deductions:

  • Section 80C (₹1.5 lakh cap): PPF, EPF, ELSS, life insurance premium, home loan principal, children’s tuition, NSC. If your EPF contribution is 12% of basic salary, this limit is often already close to filled without extra investment.
  • Section 80D: health insurance premiums, ₹25,000 for self and family, with an additional amount for senior citizen parents.
  • Section 24(b): home loan interest, up to ₹2 lakh for a self-occupied property — the single largest deduction available outside 80C.
  • HRA exemption: now extended to the 50% metro rate for Bengaluru, Pune, Hyderabad, and Ahmedabad, in addition to the original four metros. Disclosing your landlord relationship is now a mandatory part of this claim.

What You Can Still Save Under the New Regime

The new regime trades most deductions for lower rates, but a few benefits remain:

  • Standard deduction of ₹75,000 for salaried individuals and pensioners
  • Employer’s NPS contribution under Section 80CCD(2), up to 14% of basic salary plus DA for all employees, a meaningful increase from the earlier 10% cap for private sector staff
  • Section 87A rebate, making income up to ₹12 lakh effectively tax-free, or ₹12.75 lakh once the standard deduction is included

Which Regime Actually Wins for You

There’s no universal answer here, but a rough guide helps. If your total deductions under 80C, 80D, HRA, and home loan interest add up to less than roughly ₹3.75–4 lakh at a ₹15 lakh salary level, the new regime typically comes out ahead. Cross that threshold, and the old regime usually saves more. Running both calculations before filing, rather than assuming one is automatically better, is worth the extra ten minutes.

Which ITR Form Applies to Salary Income

Most salaried employees fall into one of two forms:

  • ITR-1 (Sahaj): for resident individuals with salary or pension income, up to two house properties, and other income like interest, provided total income stays under ₹50 lakh, with no foreign assets or business income.
  • ITR-2: needed if you have capital gains beyond ITR-1’s limits, foreign assets or income, more than two house properties, or total income above ₹50 lakh.

Documents to Keep Ready Before You File

  • Form 16 from your employer (issued by 15 June)
  • Form 26AS and AIS, to reconcile TDS and other reported income
  • PAN, Aadhaar, and bank account details
  • Proof for Section 80C, 80D, and 24(b) claims, if using the old regime
  • HRA rent receipts and landlord PAN, if claiming this exemption

Step-by-Step Filing Process

  1. Log in to the e-filing portal using your PAN.
  2. Select Assessment Year 2026-27 and choose your correct ITR form.
  3. Review pre-filled income and TDS details against your Form 16 and AIS.
  4. Choose your regime, and enter deductions if using the old regime.
  5. Verify your tax computation and pay any self-assessment tax due.
  6. Submit and e-verify your return, ideally through Aadhaar OTP or net banking.

Deadlines and What Happens If You Miss Them

The due date for both ITR-1 and ITR-2 for AY 2026-27 is 31 July 2026. Missing this allows a belated return until 31 December 2026, but with late fees under Section 234F, interest on any unpaid tax, and one significant catch: filing late means you lose the option to choose the old regime for that year entirely.

Given how much a single regime choice or a missed deadline can cost, it’s worth having a CA review your numbers before you file. Tax Vic’s Income Tax Return Filing and Tax Planning services help salaried individuals choose the right regime and file accurately, well before the deadline.

Key Takeaways

Choosing between the old and new regime, and filing the correct ITR form, are the two decisions that shape your entire tax outcome as a salaried employee. Run the numbers for both regimes, gather your documents early, and file before 31 July to keep every option open.

Need help with this? If you’d like a CA to help you choose the right regime and file your ITR, book a 15 min free consultation with Tax Vic.

Author: CA Reetu Bhandari

Published: 2 December 2022

Last Reviewed: 6 July 2026

Disclaimer: This article is intended for general informational purposes only and does not constitute tax or legal advice. Readers are advised to consult a qualified Chartered Accountant before making any tax-related decisions based on this content.