ITR filing: Key strategies to maximise savings and reduce tax liability

With the start of the financial year 2026-27, taxpayers are required to plan their finances that align with the current income tax rules and available exemptions. Tax planning involves assessing income, investments and eligible deductions to determine the overall tax liability for the year.

Financial and tax planning ahead of ITR filing is crucial because tax efficiency is achieved during the year, not just at the time of filing. “The return is just a reporting mechanism without prior planning; most optimization opportunities are already lost,” said Nishant Shanker, an independent tax strategy expert and former senior manager of tax at EY.

Apart from that, liquidity and investment goals are other key factors that make a planned approach to tax-saving important, rather than relying on last-minute, tax-saving dictated investments, said Siddharth Maurya, Founder & Managing Director of Vibhavangal Anukulakara Private Limited.

“Tax-related targets with a planned framework minimize the risk of tax filing as an event that is legally required by achieving strategic and tactical benefits,” he said.

Top strategies to maximise tax savings

The Income Tax Act offers multiple legal ways to reduce your tax burden. Here's what experts advise taxpayers:

• Deductions: Utilise Section 80C, 80D and similar provisions through instruments such as health insurance, life insurance, PPF and ELSS.
• Tax regime: Choose between the old regime (with deductions) and the new regime (with lower rates and fewer exemptions) based on your income profile. Generally, taxpayers with an annual income of less than ₹10 lakh should opt for the new regime to avail incentives.
• Salary structuring: Plan components such as House Rent Allowance (HRA), Leave Travel Allowance (LTA) and reimbursements to reduce the total taxable income.
• Capital gains: Optimize taxes through strategies such as tax harvesting and timing the sale of assets.
• Business expenses: Track and claim eligible expenses to lower taxable income for business owners and freelancers.
• Compliance focus: Prioritise legal efficiency over aggressive tax positions.
• Financial Alignment: Align tax planning with overall financial goals rather than focusing solely on tax savings.

Common mistakes that may reduce your tax savings

The most frequent mistake is waiting until the last minute and, as a result, being forced to make tax investments that ultimately yield low returns, with the tax paid being locked in for this purpose, according to Maurya.

“Not using tax exemptions and deductions to the fullest is also a stark mistake. A large number of tax withholdings, meant to be claimed as tax deductible (be it health premiums, home loan(s) interest and tax, or (re)education loan(s) interest), are simply kept and claimed as being paid,” he said.

Some taxpayers opt for the new tax regime for its simplicity, but in doing so, may overlook significant deductions available under the old regime, Maurya said.

Inadequate tax records can definitely confirm that tax-missed payment strategies are undoubtedly the most financially painful, he said, adding that insufficiently documented income, missing receipts and tax deductions left on the table increase tax liability and create a potential tax audit.

“Finally, following bad advice can be costly. Because tax codes are updated regularly, inaccurate guesswork and old advice will probably lead to unnecessary tax savings,” Maurya advised, urging taxpayers to stay vigilant and informed.