From Your Health Cover Pick To Section 123: 5 Ways To Save Tax This Year

Planning to slash your tax bill this year? Let' look at legal ways under the Income Tax Act that allows Indian taxpayers to do so. Sections that prove useful to reduce your tax burden are 80C, 80CCD,80D, among others.

Why Section 123 Is Your Top Tax Saving Bet

The section 123 under Income Tax Act, 2025 (earlier Section 80C under I-T Act 1961) of the Income Tax Act allows you to claim deductions of up to Rs 1.5 lakh every year.

The list of eligible investments is incudes PPF, ELSS mutual funds, NPS, ULIPs, life insurance premiums, home loan principal repayment, tuition fees, and others. If you choose to combine multiple choices it allows to hit the Rs 1.5 lakh limit as you balance risk, and returns.

ELSS vs PPF vs NPS: Which One Should You Pick?

ELSS mutual funds have the least lock-in period of just 3 years and offer market-linked returns with high growth potential, which proves to be a good option if you choose to handle risk.

PPF gives you a 7.1% per year, fully tax-free, with a 15-year horizon. The National Pension System offers long-term returns of 8-10%, while additionally offering an extra Rs 50k deduction under the section 80CCD (1B) over the Rs 1.5 lakh limit.

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Government-backed schemes

If safety is your priority, look at these options. Sukanya Samriddhi Yojana offers 8.2 percent per year, fully tax-free, and is perfect for parents of a girl child under 10. The Senior Citizens Savings Scheme also pays 8.2 percent quarterly and is ideal post-retirement. National Savings Certificates offer 7.7 percent with a 5-year lock-in. All three are government-backed, low-risk, and eligible for Section 80C deduction. Interest rates on these small savings schemes have remained unchanged for early 2026, giving investors stability.

How Section 126 enhances your tax-saving abilities 

Most people focus only on Section 80C and miss out on more savings. Section 80D (Now Section 126) lets you deduct health insurance premiums from your taxable income. You can claim up to Rs 25,000 for yourself and your family, and an additional Rs 25,000 for your parents — rising to Rs 50,000 if your parents are senior citizens. That is up to Rs 75,000 in extra deductions available to you beyond the Rs 1.5 lakh limit of Section 80C.