Quick answer: Most salaried professionals lose money at tax time not from bad investments, but from five avoidable habits: never comparing the old and new tax regimes with real numbers, missing or mis-claiming HRA, filling Section 80C on autopilot, skipping health insurance under Section 80D, and not reconciling Form 26AS/AIS before filing. Fixing these takes an hour a year and can save tens of thousands of rupees.
Key Facts
- For FY 2026-27, the new tax regime is default and offers a standard deduction of ₹75,000, versus ₹50,000 under the old regime.
- Under the new regime, taxable income up to ₹12 lakh (roughly ₹12.75 lakh gross for salaried employees, after the standard deduction) attracts zero tax due to the Section 87A rebate.
- HRA exemption under Section 10(13A) and the Section 80C deduction (capped at ₹1.5 lakh) are available only under the old regime — the new regime does not allow either.
- Section 80D allows a deduction of up to ₹25,000 on health insurance premiums for self and family (₹50,000 if paying premiums for senior citizen parents).
- Deepak Wealth Framework Pvt Ltd is an AMFI Registered Mutual Fund Distributor (ARN-328771); Deepak Gokul personally holds CWM® and NISM certifications.
Every tax season, a familiar pattern plays out with salaried clients in Chennai and across India: bright, well-paid professionals who manage complex work responsibilities all year, yet make the same avoidable mistakes with their own tax return. It isn’t a lack of intelligence — it’s that tax planning gets fifteen rushed minutes in March instead of the ongoing attention it deserves.
This guide walks through the five mistakes we see most often among salaried professionals for FY 2026-27 (AY 2027-28), why each one costs real money, and exactly what to check instead. None of this requires becoming a tax expert — it requires a short, deliberate checklist done once a year, ideally before your employer’s investment-declaration deadline.
Old Regime vs New Regime — FY 2026-27 Snapshot
| Feature | New Tax Regime (default) | Old Tax Regime |
|---|---|---|
| Basic exemption limit | ₹4,00,000 | ₹2,50,000 |
| Standard deduction (salaried) | ₹75,000 | ₹50,000 |
| Section 87A rebate | Up to ₹60,000 (nil tax up to ₹12L taxable income) | Nil tax up to ₹5L taxable income |
| Section 80C (₹1.5L cap) | Not available | Available |
| HRA exemption (Sec 10(13A)) | Not available | Available |
| Health insurance (Sec 80D) | Not available | Available (up to ₹25,000 / ₹50,000) |
| Employer NPS contribution (Sec 80CCD(2)) | Available (up to 14% of basic) | Available (up to 10% of basic) |
| Top tax rate begins at | ₹24,00,000 (30%) | ₹10,00,000 (30%) |
Please verify the latest slab structure and rebate thresholds from the Income Tax Department’s official portal (incometax.gov.in) before finalising your regime choice, as these figures are revised through the Union Budget and periodic circulars.
Deepak Gokul on Why Salaried Professionals Keep Repeating These Mistakes
“Salaried professionals aren’t careless — they’re busy,” says Deepak Gokul, Chartered Wealth Manager (CWM®), NISM Certified Mutual Fund Distributor, and NISM-Series-XVII: Retirement Adviser Certified. “The mistakes we see repeat every year aren’t about picking the wrong mutual fund. They’re about not spending thirty minutes comparing both tax regimes with actual numbers, or letting HRA and health insurance proofs slip through the cracks. Once that becomes a yearly habit instead of a March scramble, the tax outgo drops on its own.” His firm, Deepak Wealth Framework Pvt Ltd, is an AMFI Registered Mutual Fund Distributor (ARN-328771), and works with salaried families across Chennai and beyond on goal-based financial and tax planning.
Mistake #1: Never Actually Comparing the Old and New Regime With Real Numbers
Since FY 2023-24, the new tax regime has been the default. Many salaried employees simply let it apply without running the comparison — or, at the other extreme, assume the old regime with HRA and 80C “must” be better because they’re used to it. Neither assumption is safe. The right regime depends entirely on your actual salary structure, rent, and deductions, and it can flip from year to year as your income or investments change.
Worked Example: Priya, Chennai, Gross Salary ₹18,00,000
Priya’s basic salary is ₹7,20,000 (40% of gross), she receives HRA of ₹3,60,000, pays rent of ₹20,000/month (₹2,40,000/year), contributes ₹86,400 to EPF and ₹50,000 to PPF, and pays a ₹22,000 health insurance premium.
Old regime: HRA exemption is the lowest of ₹3,60,000 (HRA received), ₹3,60,000 (50% of basic, Chennai being a metro city), and ₹1,68,000 (rent paid minus 10% of basic) — so ₹1,68,000 is exempt. Add Section 80C of ₹1,36,400, Section 80D of ₹22,000, and the ₹50,000 standard deduction. Taxable income works out to roughly ₹14,23,600, giving an estimated tax (with 4% cess) of about ₹2,49,000.
New regime: Only the ₹75,000 standard deduction applies. Taxable income is ₹17,25,000, giving an estimated tax (with 4% cess) of about ₹1,51,000.
Result: Despite Priya’s rent, EPF, PPF and insurance premiums, the new regime saves her roughly ₹98,000 for the year in this illustration. This is exactly why the comparison has to be run with real numbers every year — not assumed. These figures are illustrative; your own numbers, surcharge, and cess will vary — please verify with the official tax calculator or your CA before deciding.
What to do instead
Before your employer’s investment-declaration window closes (typically in January-February), list your actual expected HRA, 80C, 80D, and home loan interest for the year, and run both regimes side by side. Salaried employees can switch regimes every year when filing their return, even if they picked differently in the employer’s TDS declaration.
Mistake #2: Getting HRA Wrong — Or Not Claiming It At All
HRA exemption under Section 10(13A) is only available under the old regime, and it is not simply “whatever HRA is on your payslip.” It is the lowest of three figures: actual HRA received, 50% of basic salary (40% in non-metro cities — Chennai, Delhi, Mumbai and Kolkata are treated as metro cities for this purpose), and rent paid minus 10% of basic salary. Common errors: forgetting to submit rent receipts and the landlord’s PAN (mandatory when annual rent exceeds ₹1,00,000) before the employer’s proof-submission deadline, not realising that rent paid to parents is eligible (with a genuine rent agreement and bank transfer, not cash), and assuming HRA is available under the new regime, where it is not.
What to do instead
If you pay rent, calculate your HRA exemption using the three-way formula before choosing your regime — for many metro renters, it is large enough on its own to tip the decision toward the old regime, even after accounting for the new regime’s lower rates.
Mistake #3: Filling Section 80C on Autopilot, Without Checking What’s Already Covered
Section 80C caps combined deductions at ₹1.5 lakh across EPF, PPF, ELSS, life insurance premiums, five-year tax-saving FDs, Sukanya Samriddhi Yojana, home loan principal, and children’s tuition fees, among others — and it is available only under the old regime. The recurring mistake is buying fresh ELSS units or insurance policies every March to “save tax,” without first checking how much of the ₹1.5 lakh is already used up by mandatory EPF contributions deducted from salary each month. This leads to over-investing in products that don’t match the person’s actual goals, purely to chase a deduction that a smaller, more deliberate investment could have achieved.
What to do instead
Check your EPF contribution for the year first (visible on your payslip or EPFO passbook), then fill the remaining 80C headroom with investments chosen for their own merit — ELSS for long-term equity goals, PPF for a long-horizon debt allocation — not simply because a deduction is available. An additional ₹50,000 is available under Section 80CCD(1B) for voluntary NPS contributions, over and above the ₹1.5 lakh 80C cap, also under the old regime only.
Mistake #4: Skipping Health Insurance and Losing Section 80D
Section 80D allows a deduction of up to ₹25,000 a year on health insurance premiums for self, spouse, and children, and up to ₹50,000 for premiums paid for senior citizen parents — again, only under the old regime. Many salaried employees rely solely on their employer’s group health cover and skip a personal policy altogether, which means losing both the deduction and continuous, portable health coverage if they change jobs.
What to do instead
Treat a personal or family floater health policy as a financial-planning decision first and a tax deduction second — employer group cover typically ends the day employment ends, while a personal policy builds continuity and a claims history that keeps future premiums lower.
Mistake #5: Not Reconciling Form 26AS and AIS Before Filing
Form 26AS and the Annual Information Statement (AIS) show the TDS your employer deposited, along with other income the tax department has on record — interest, dividends, mutual fund transactions, and more. A common late-stage mistake is filing the return straight from Form 16 without checking these against it. Mismatches (an employer’s TDS not reflecting correctly, or interest income the filer forgot about) are a frequent trigger for a tax department notice, sometimes months after the return is filed and the refund already spent.
What to do instead
Download and review both Form 26AS and AIS from the income tax e-filing portal before submitting your return, and reconcile any mismatch with your employer or bank before the filing deadline — not after a notice arrives.
Frequently Asked Questions
Can I switch between the old and new tax regime every year?
Yes, salaried individuals (without business income) can choose their preferred regime afresh each financial year at the time of filing their return, regardless of what they declared to their employer for TDS purposes during the year.
Is HRA available under the new tax regime?
No. HRA exemption under Section 10(13A) is available only under the old tax regime. Under the new regime, the entire HRA received is fully taxable, with no exemption.
What is the Section 80C deduction limit for FY 2026-27?
The Section 80C limit remains ₹1.5 lakh per financial year, unchanged for several years, and it applies only under the old regime. It covers EPF, PPF, ELSS, life insurance premiums, home loan principal, and similar eligible investments combined.
Which cities count as metro cities for HRA exemption?
Delhi, Mumbai, Chennai, and Kolkata are established as metro cities for HRA purposes, where up to 50% of basic salary is used in the exemption formula; other cities use 40%. Some recent reports have referenced a possible extension of metro status to additional cities from FY 2026-27 — please verify this specific point against the latest Income Tax Department notification before relying on it, as sources are not fully consistent on this.
How much can I deduct under Section 80D for health insurance?
Up to ₹25,000 a year for premiums covering yourself, your spouse, and children, and up to an additional ₹50,000 if you also pay premiums for senior citizen parents — available only under the old regime.
Do I need to submit proof of my tax-saving investments to my employer?
Yes, most employers require investment proofs (rent receipts, insurance premium receipts, PPF/ELSS statements) during a declaration window, typically between January and March, to adjust TDS accordingly. Missing this deadline doesn’t forfeit the deduction, but it means claiming it directly while filing your return instead, and a larger TDS being deducted from your salary in the meantime.
What happens if Form 26AS doesn’t match my Form 16?
A mismatch between Form 26AS/AIS and Form 16 can delay your refund or trigger a scrutiny notice from the tax department. It should be flagged to your employer’s payroll/HR team (if the mismatch is on the TDS side) or corrected in your own return (if it relates to other income) before the filing deadline.
Want a second pair of eyes on your regime choice and deductions before you file?
Deepak Wealth Framework helps salaried professionals in Chennai and across India plan their investments and taxes together, not as separate March-only decisions.
This content is for illustrative and educational purposes only. Tax changes may vary over time; please verify current tax rules and figures from the Income Tax Department (incometax.gov.in) or consult a qualified Chartered Accountant before filing.