Income Tax Planning for Salaried Employees: Advanced Strategies (FY 2025-26)

Tax planning is often reduced to a last-minute scramble for Section 80C receipts in March. However, for the modern salaried employee earning above ₹15 Lakhs, standard deductions are no longer enough. To truly optimize your tax liability, you need to move beyond basic savings and look at structural salary changes and advanced investment vehicles.

This guide covers high-impact strategies for FY 2025-26, focusing on the evolved tax landscape including the enhanced New Tax Regime benefits.

1. The Regime Dilemma: Mathematical Precision

The choice between the Old and New Tax Regimes is no longer about “simplicity.” It is a calculation of your Breakeven Deduction Amount. For FY 2025-26, the New Regime has become the default and more attractive for most, thanks to the increased Standard Deduction (₹75,000) and relaxed slabs.

However, the Old Regime remains superior if and only if your total allowable deductions exceed the breakeven threshold. Use this reference table to decide:

Note: Deductions include 80C, 80D, HRA, LTA, and Home Loan Interest (Section 24). If you don’t have a large Home Loan or HRA, the New Regime is likely your winner [web:2][web:14].

2. Salary Restructuring: The “CTC” Optimization

If you are in the 30% bracket, every ₹100 of taxable allowance given to you is worth only ₹70 in your pocket. Negotiating your salary structure (CTC) with your HR is the most powerful tool at your disposal. Here are three underutilized components:

A. The NPS Corporate Route (Section 80CCD(2))

This is the “Crown Jewel” of tax planning for high earners. Under Section 80CCD(2), your employer can contribute up to 14% of your Basic Salary + DA directly to your NPS Tier-I account.

• Benefit: This amount is deducted from your taxable income over and above the ₹1.5 Lakh (80C) and ₹50,000 (80CCD(1B)) limits.
• FY 2025-26 Update: The limit for private sector employees has been increased to match government employees at 14% (up from 10%), making it a massive tax saver under the New Regime as well [web:8][web:12].

B. Company Leased Car Policy

Instead of buying a car on EMI from your post-tax salary, opt for a Company Leased Car.

• How it works: The company leases the car and deducts the EMI from your pre-tax salary.
• Tax Logic: You are taxed only on the “perquisite value” of the car (which is a small, fixed amount based on engine capacity, e.g., ₹3,300/month), rather than the full EMI amount. This can save you ₹5,000–₹10,000 in taxes monthly.

C. Gadget & Asset Perks

If your work requires a laptop or tablet, request your employer to buy it and provide it to you for official use. The value of computers/laptops provided for official use is generally tax-exempt as a perquisite. Buying it yourself gives you zero tax breaks.

3. Family Tax Planning: The HUF Strategy

For married Hindu, Sikh, Jain, or Buddhist males, creating a Hindu Undivided Family (HUF) entity is a legitimate way to create a separate tax file [web:7][web:15].

The Strategy:

• Separate Exemption Limit: An HUF has its own basic exemption limit (₹2.5 Lakh or ₹3 Lakh depending on the regime).
• Separate 80C: The HUF can claim its own ₹1.5 Lakh deduction under Section 80C.
• Income Diversion: Instead of investing in your name (where it is taxed at 30%), transfer funds to the HUF (via gift/loan) and invest in the HUF’s name. Use the income to pay for family expenses like life insurance premiums for members.

4. Investment Alpha: Tax Harvesting

Taxes on investments eat into your compounding. Advanced planners use Tax Harvesting to minimize Capital Gains Tax.

Equity LTCG Harvesting

Long Term Capital Gains (LTCG) on equity mutual funds and stocks are exempt up to ₹1.25 Lakh per financial year [web:15].

• Action: Every March, if your unrealized gains are below ₹1.25 Lakh, sell your units to “book” the profit (tax-free) and immediately buy them back.
• Result: You reset your buying price (cost of acquisition) to a higher level, reducing your future tax liability.

Loss Harvesting

If you have poor-performing stocks, book the short-term losses. These can be set off against other taxable capital gains, thereby reducing your net taxable income for the year. Unadjusted losses can be carried forward for 8 years.