How to Legally Reduce Tax Liability Before Financial Year-End (2025)
Introduction
As the financial year-end approaches, individuals and business owners rush to find legitimate strategies to reduce their tax burden. If you’re looking to reduce tax liability before financial year-end 2025, it’s crucial to act smartly and lawfully. With updated exemptions, deductions, and revised limits announced in Budget 2025, there are several avenues available to help you save on taxes.
This guide, prepared by Makwana Sweta & Associates, trusted Tax Consultants in Mumbai, shares time-tested and budget-aligned ways to optimize your taxes before March 31st.
1. Use Section 80C to Its Full Potential
You can claim up to Rs. 1.5 lakh under Section 80C through various tax-saving investments and expenses:
- Life Insurance Premiums (Self/spouse/children)
- Public Provident Fund (PPF)
- ELSS Mutual Funds (3-year lock-in)
- 5-Year Tax Saving Fixed Deposits
- Principal Repayment on Home Loan
- Tuition fees for up to 2 children
Tip: Don’t wait till March. Start SIPs or lump sum investments now to spread the financial load.
2. Invest in National Pension Scheme (NPS) – Section 80CCD(1B)
You can claim an additional Rs. 50,000 deduction under Section 80CCD(1B) by contributing to the NPS. This is over and above the 80C limit and is especially useful for salaried individuals aiming to build a retirement corpus.
3. Deduction on Health Insurance – Section 80D
Get deductions on medical insurance premiums:
| Category | Deduction Limit |
|---|---|
| Self, Spouse, and Children | Rs. 25,000 |
| Parents (below 60 years) | Rs. 25,000 |
| Parents (above 60 years) | Rs. 50,000 |
| Preventive Health Check-up | Rs. 5,000 (within 80D) |
Combine Section 80C and 80D wisely to maximize savings.
4. Claim House Rent Allowance (HRA)
If you live in rented accommodation and receive HRA as part of your salary, claim exemption under Section 10(13A). You’ll need:
- Rent receipts
- PAN of landlord (if rent > Rs. 1 lakh/year)
- Proof of payment
5. Consider the Standard Deduction
All salaried taxpayers are allowed a standard deduction of Rs. 50,000. This is automatically applied, so there’s no need for submission of investment proof.
Even under the new regime, the 2025 Budget retains the standard deduction for salaried and pensioners.
6. Claim LTA (Leave Travel Allowance)
You can claim LTA twice in a block of 4 years for travel within India. It covers travel fare but not food or hotel. Ensure you:
- Travel by recognized public transport
- Keep tickets and boarding passes
- File the claim before March 31st
7. Donate to Approved Charities – Section 80G
Donations to registered trusts, relief funds, or NGOs qualify for 50% to 100% deductions under Section 80G. Ensure you:
- Get a valid donation receipt
- Ensure the organization is registered under 80G
- Donate via cheque/bank transfer (not cash > Rs. 2,000)
8. Education Loan Interest – Section 80E
If you’ve taken an education loan for higher studies (self/spouse/children), the interest paid is fully deductible under Section 80E. No upper limit, but the deduction is allowed for 8 consecutive years.
9. Plan Capital Gains
Sell or reinvest wisely to reduce tax:
- Invest in Section 54EC Bonds (NHAI/REC) within 6 months to avoid capital gains on property
- Offset short-term capital losses against gains
Consult a Chartered Accountant in Mumbai to structure your capital gains planning efficiently.
10. Opt for New or Old Tax Regime Wisely
For FY 2024–25, the New Tax Regime is the default, but taxpayers can opt out each year. Compare your situation:
| Income Level | Old Regime (with deductions) | New Regime (lower slabs, no deductions) |
| Rs. 7 lakh | Tax-free via rebates | Tax-free due to rebate |
| Rs. 10 lakh | Better if using 80C, 80D | Better if no investments |
Use the Income Tax Calculator on the Income Tax India website to make a choice.
Final Thoughts
Tax planning is a year-round activity. But if you want to reduce tax liability before financial year-end 2025, the time to act is now. Leverage deductions, structure investments, and take expert advice to save more legally.
Need help? Contact Makwana Sweta & Associates, offering trusted CA services in Mumbai and across India. Our experienced team of Chartered Accountants and Tax Consultants in Mumbai will help you optimize your tax strategy.
Useful Links
- Outbound: Section-wise Deduction Chart (Income Tax India)
- Inbound: Tax Filing Services