Complete Tax Saving Illustration Under Old Regime (80C + 80D + HRA Explained)

Many salaried individuals fail to optimise deductions properly.

Let’s understand with a structured example how tax planning works under the Old Tax Regime.

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Example Case:

Gross Salary: ₹15,00,000

Basic Salary: ₹7,00,000  

HRA Received: ₹3,00,000  

Other Allowances: ₹5,00,000  

Rent Paid: ₹25,000 per month (₹3,00,000 annually)

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Step 1: HRA Exemption Calculation

HRA exemption = Least of:

1) Actual HRA received = ₹3,00,000  

2) 50% of Basic Salary (Metro) = ₹3,50,000  

3) Rent paid – 10% of Basic  

   ₹3,00,000 – ₹70,000 = ₹2,30,000  

Eligible HRA Exemption = ₹2,30,000  

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Step 2: Deduction Under Section 80C

Eligible Investments:

PF + ELSS + LIC etc = ₹1,50,000 (Maximum limit)

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Step 3: Deduction Under Section 80D

Health Insurance Premium:

Self & Family = ₹25,000  

Parents (Senior Citizen) = ₹50,000  

Total 80D Deduction = ₹75,000  

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Step 4: Taxable Income Calculation

Gross Salary: ₹15,00,000  

Less HRA Exemption: ₹2,30,000  

Revised Income: ₹12,70,000  

Less 80C: ₹1,50,000  

Less 80D: ₹75,000  

Total Taxable Income: ₹10,45,000  

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Key Insight:

Without planning → Tax on ₹15,00,000  

With planning → Tax on ₹10,45,000  

Effective reduction: ₹4,55,000  

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Conclusion:

Old Regime can still be beneficial when:

• HRA exemption is high  

• 80C limit fully utilised  

• Health insurance deduction claimed  

Tax planning must be done before the financial year ends.

Always compute both regimes before deciding.