For salaried employees in India in 2026, government schemes represent one of the most powerful, risk-free ways to reduce tax liability, build long-term wealth, secure retirement income, protect health and family, and plan for children’s future — often at little or no extra cost beyond regular salary deductions or small monthly contributions. Yet most salaried individuals miss 60–70% of these benefits due to lack of awareness, procrastination, or assuming “it’s only for low-income groups.” In reality, schemes like NPS (with employer contribution), PPF/ELSS (80C), health insurance (80D), term life cover, home loan deductions, Sukanya Samriddhi (for daughters), and Atal Pension Yojana (for side income) can collectively save ?1–3 lakh+ in tax annually for middle-income earners (?10–25 lakh CTC) while creating multi-crore retirement and child education corpus over 15–25 years.

The new tax regime (default since FY 2025–26) simplified slabs but removed most deductions — making the old regime (opt-in) far superior for salaried people who actively use these schemes. With repo rate stable at 5.25%, inflation benign (4.5–5.5%), and equity markets delivering 12–15% long-term CAGR, 2026 is an excellent time to optimise salary structure, maximise contributions, and layer government-backed schemes for tax savings and future security.

This complete, practical 2026 guide lists the must-use government schemes for every salaried person, explains how they work, their tax benefits, eligibility, contribution rules, returns, and strategic usage — with a clear checklist to implement them all. Whether you earn ?8 lakh or ?25 lakh CTC, these schemes can reduce your effective tax to near-zero legally while building significant wealth.

NPS (National Pension System) – The #1 Scheme for Salaried

National Pension System (NPS) is the most powerful tax-saving and retirement-building tool for salaried employees in 2026 — especially due to employer contribution benefits that are tax-free in both old and new regimes.

How NPS Works for Salaried

• Tier I (main retirement account): Strict lock-in till age 60 (limited partial withdrawals).
• Employer contribution (Section 80CCD(2)): Up to 14% of salary (basic + DA) — completely tax-free (does not count in 80C limit). Many companies now offer 10–14% NPS contribution — huge tax saver.
• Own contribution (Section 80CCD(1B)): Extra ?50,000 deduction in old regime (over 80C limit).
• Asset allocation: Equity exposure (up to 75%) + debt/government securities — long-term returns 10–14%+ possible.
• At retirement (age 60): Minimum 40% annuitized for pension, maximum 60% lump-sum withdrawal (tax-free).

Tax Benefits

• Employer contribution (80CCD(2)): Tax-free up to 14% salary — biggest lever.
• Own contribution (80CCD(1B)): ?50,000 extra deduction (old regime).
• Maturity: 60% lump-sum tax-free; annuity portion taxed as income.

2026 reality:

• Many companies offer 10–14% NPS — zero-tax game changer for high-slab earners.
• NPS equity tier delivered 12–15%+ CAGR long-term.

Action: Immediately ask HR to start/raise NPS contribution (up to 14% of basic + DA) — this is the biggest tax-free lever for salaried employees, reducing taxable income while growing your retirement corpus.

PPF & Other 80C Schemes – Guaranteed & Tax-Free

Section 80C allows deduction up to ?1.5 lakh per year in old regime — PPF, NSC, 5-year FD, ELSS, life insurance premium, tuition fees, home loan principal, and Sukanya Samriddhi are key options.

Public Provident Fund (PPF)

• Interest rate: 7.1% p.a. (compounded annually, tax-free).
• Maximum ?1.5 lakh/year — 15-year lock-in, extendable indefinitely.
• Benefits: Triple tax-free (80C + interest + maturity), sovereign guarantee, loan/partial withdrawal facility after 3–7 years.

National Savings Certificate (NSC)

• Interest rate: 7.7% p.a. (compounded annually).
• 5-year tenure — qualifies for 80C.
• Benefits: Guaranteed returns, no market risk.

Equity-Linked Savings Scheme (ELSS)

• 3-year lock-in, equity exposure — potential 12–15%+ long-term returns.
• Benefits: 80C deduction + growth potential.

Sukanya Samriddhi Yojana (SSY)

• For girl child <10 years — 8.2% p.a. tax-free.
• Maximum ?1.5 lakh/year — maturity at 21 or marriage after 18.

2026 tip:

• PPF rate stable at 7.1% — tax-free interest makes it superior to FD for long-term.
• ELSS for growth-oriented investors — beats inflation significantly.

Action: Max ?1.5 lakh 80C every year — split across PPF (safety + tax-free) + ELSS (growth) — start early in financial year for maximum compounding.

For PPF details, see Public Provident Fund (PPF): How To Invest And Get Maximum Returns.

Health & Life Insurance – Double Benefit Schemes

Health and life insurance offer protection + tax savings — essential for salaried families.

Health Insurance (Section 80D):

• Self/family: ?25,000 (?50,000 if senior citizen).
• Parents: Additional ?25,000 (?50,000 if senior).
• Preventive check-up: Extra ?5,000.
• Benefits: Covers hospitalisation — cashless at network hospitals.

Life Insurance (Term Plans):

• Premiums under 80C (old regime).
• Death benefit tax-free under 10(10D).
• Benefits: ?1 crore+ cover for ?10,000–?20,000/year — income replacement.

Critical Illness Rider:

• Lump-sum on diagnosis — covers income loss, rehab.

Action: Buy ?10–25 lakh family floater health policy + ?1 crore term life cover — claim both 80C and 80D deductions — ensure premium waiver in life policy.

Choose health plans wisely in How To Buy The Best Health Insurance Plans In India (Updated Oct 2025).

Home Loan – Indirect Tax-Saving Powerhouse

Home loan interest and principal offer deductions in old regime:

• Section 80C — Principal repayment up to ?1.5 lakh.
• Section 24(b) — Interest up to ?2 lakh/year (self-occupied property).
• Prepayment — Reduces tenure and interest — saves lakhs.

Action: Prepay home loan aggressively — especially early years — save lakhs in interest + claim full deductions under 80C and 24(b).

Shorten tenure smartly via How To Reduce Home Loan Tenure From 25 To 5–10 Years– Save Lakhs With Smart Prepayment Strategies.

APY & Other Pension Schemes – For Side Income

Atal Pension Yojana (APY):

• Guaranteed ?1,000–?5,000/month pension after 60.
• For unorganised workers — age 18–40, not income tax payer.
• Low contribution — ?42–?2,500/month depending on age and pension choice.

PM Vaya Vandana Yojana:

• For seniors >60 — 8.2% assured return, monthly pension.

Action: If informal income exists or side business — enrol in APY — guaranteed pension with low contribution.

Sukanya Samriddhi & Child Education Schemes

Sukanya Samriddhi Yojana (SSY):

• For girl child <10 years — 8.2% p.a. tax-free.
• Maximum ?1.5 lakh/year — maturity at 21 or marriage after 18.
• Triple tax-free — 80C + interest + maturity.

Education Loan Interest:

• Section 80E — no limit, 8 years deduction.

Action: Open SSY for daughters — max contribution — secure education/marriage tax-free.

Your Salaried Government Scheme Checklist

Here is your step-by-step checklist to maximise government schemes in 2026:

1. NPS — Maximize employer (14% salary tax-free) + own ?50,000 (80CCD(1B) old regime).
2. 80C max — ?1.5 lakh in PPF/ELSS/LIC/home loan principal.
3. 80D health cover — ?25,000–?1 lakh family + parents.
4. Term life cover — ?1 crore+ for income replacement.
5. Home loan benefits — Principal (80C) + interest (24(b)).
6. SSY for girls — 8.2% tax-free for daughters.
7. APY — If informal income — guaranteed pension.

Action: Tick which ones you already use — fill gaps this month — start with NPS employer contribution and 80C max — build layered security.

Pay Zero Tax Legally – Start Planning Today

Smart use of government schemes turns tax outflow into wealth building — act before March salary structuring to optimise FY 2026–27.

Action: Pay zero or near-zero tax legally — start planning today with regime comparison, NPS maximisation, full 80C/80D deductions, term cover, and SSY/APY enrolment.

NiveshKaro connects you instantly with certified, unbiased financial advisors registered with IRDA, SEBI, and AMFI. For personalized zero-tax salary structuring, regime selection, or complete FY 2026–27 tax-saving plan, fill out the form today to start making confident financial decisions.