How To Save Tax For Salary Above 10 Lakhs?
How To Save Tax For Salary Above 10 Lakhs?
In India, the Income Tax Department levies taxes on an individual’s income according to the applicable tax slab. Taxpayers often seek ways to minimize their tax liability on their salary, and understanding salary optimization is crucial for this purpose. If you aim to reduce tax payments on a salary exceeding 10 lakhs, read on for valuable tax planning insights.
Latest Update
As per the Finance Act 2023, there have been updates to the Tax Slabs under the New Tax Regime. The basic exemption limit is now Rs. 3,00,000, and the Rebate under Section 87A applies to incomes up to Rs 7,00,000. Consequently, individuals with incomes below Rs. 7,00,000 will have zero Tax Liability if they opt for the New Tax Regime.
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Income Tax Slabs Under Old vs New Tax Regime
Let’s compare the tax regimes and understand how to choose between the old and new tax structures:
Tax Slab FY 2023-24
Tax Rate (Old tax regime)
Up to Rs 2,50,000 Nil
Rs 2,50,000 – Rs 5,00,000 5%
Rs 5,00,000 – Rs 10,00,000 20%
Rs 10,00,000 and beyond 30%
Tax Slab FY 2023-24 Tax Rate (New tax regime)
Up to Rs 3,00,000 Nil
Rs 3,00,000 – Rs 6,00,000 5%
Rs 6,00,000 – Rs 9,00,000 10%
Rs 9,00,000 – Rs 12,00,000 15%
Rs 12,00,000 – Rs 15,00,000 20%
Rs 15,00,000 and beyond 30%
Ways To Save Tax On a 10 Lakh Salary
Understanding your salary structure, available exemptions, and deductions is essential for tax savings on your salary income.
Understanding Salary Structure:
Your salary package may include various tax-exempt allowances, with the remaining salary constituting your taxable income.
Exemptions and Deductions Under New Tax Regime
The New tax regime offers limited opportunities for claiming deductions or exemptions. The available deductions include:
- Standard deduction of Rs 50,000 (for individuals with salary income only)
- Section 80CCD(2) - Employer Contribution to NPS
- Section 80CCH - Investment in Agniveer Corpus
- Section 57(iia) - Family Pension received
- Exemptions on voluntary retirement (10(10C)), gratuity (u/s 10(10)), and Leave encashment (u/s 10(10AA))
- Interest on Home Loan for let-out property (Section 24)
- Transport allowances for specially-abled individuals
- Conveyance allowance for employment-related travel expenses
Exemptions and Deductions Under Old Tax Regime
Under the Old Tax Regime, you can benefit from various exemptions and deductions, including:
- HRA, LTA, and other allowances up to specified limits
- Deductions under Section 80C for investments like EPF, PPF, ELSS, etc.
- Deductions for health insurance premiums (Section 80D)
- Deductions for education loan interest payments (Section 80E)
- Deductions for charitable donations (Section 80G)
- Deductions for home loan payments (Principal and Interest) under Sections 80C and 24b respectively
How to Pay Zero Tax on a 10 Lakh Salary?
Let’s consider a tax computation example for both the old and new tax regimes:
Example of Calculation of Tax under New and Old Tax Regime
Mr A has a salary income of Rs. 10 lakhs. He is eligible for various exemptions and deductions. Tax calculation will be as follows:
Particular Old Tax Regime New Tax Regime
Gross Salary 10,00,000 10,00,000
Less: HRA, LTA, Children’s education allowance, Standard Deduction, Professional Tax (7,48,000) (9,50,000)
Less: Deductions under Section 80C, 80D, 80E (1,50,000) -
Net Taxable Income 4,93,000 9,50,000
Tax on the above income 12,150 54,600
Rebate u/s 87A (12,150) -
Total Tax (inclusive of cess) 0 54,600
The above comparison illustrates that while zero tax liability is achievable under the old tax regime after claiming exemptions and deductions, there is a tax liability of Rs. 54,600 in the new tax regime. Therefore, it’s crucial to evaluate which tax regime is more beneficial based on your salary, exemptions, and deductions.
How To Save Tax For Salary Above 12 Lakhs?
In India, the income tax department applies a progressive tax regime, where tax rates increase with income levels. However, by employing effective tax reduction strategies, individuals can significantly reduce their tax burden. Explore various tax-saving measures to mitigate tax liabilities on salaries exceeding Rs. 12 lakhs.
Plan Your Taxes In Advance
Save Taxes with the Tax Planner Tool
Tax Slabs Under Old vs New Tax Regime
Here’s a comparison between the old and new tax regimes:
Tax Slab FY 2023-24 Tax Rate (Old tax regime)
Up to Rs 2,50,000 Nil
Rs 2,50,000 – Rs 5,00,000 5%
Rs 5,00,000 – Rs 10,00,000 20%
Rs 10,00,000 and beyond 30%
NA NA Rs 12,00,000 – Rs 15,00,000 20%
Tax Slab FY 2023-24 Tax Rate (New tax regime)
Up to Rs 3,00,000 Nil
Rs 3,00,000 – Rs 6,00,000 5%
Rs 6,00,000 – Rs 9,00,000 10%
Rs 9,00,000 – Rs 12,00,000 15%
Rs 15,00,000 and beyond 30%
