How to Save Tax for Salary above 10 Lakhs
The Income Tax Department in India levies income taxes on people according to the tax bracket they fall under. Taxpayers are constantly looking for ways to pay no income tax. However, they do not benefit from salary optimization. As a result, your tax obligations increase along with your income.
Fortunately, there are several ways to lower your tax obligation under Indian income tax laws. Tax-saving investments are one of the best and most profitable ways to reduce your tax burden.
Read this blog if you want to pay no tax on 10 lakh income. This blog provides various pieces of advice on tax planning for salaries above 10 lakhs.
Income Tax Slabs for Individuals Under the Old Vs New Income Tax Regime
First, let us examine the various tax structures and how to select between the old and new tax structures.
The income tax slab rates for the old and new income tax systems are as follows-
|
Income Tax Slabs
|
Old Tax Regime | New Tax Regime | |||
| Less than 60 years of age & NRIs | More than 60 to Less than 80 years | More than 80 years | FY 2022-23 (Before Budget 2023) |
FY 2023-24 (After Budget 2023) |
|
| Rs 0 - Rs 2,50,000 | NIL | NIL | NIL | NIL | NIL |
| Rs 2,50,000 - Rs 3,00,000 | 5% | NIL | NIL | 5% | NIL |
| Rs 3,00,000 - Rs 5,00,000 | 5% | 5% (tax rebate u/s 87A is available) | NIL | 5% | 5% |
| Rs 5,00,000 - Rs 6,00,000 | 20% | 20% | 20% | 10% | 5% |
| Rs 6,00,000 - Rs 7,50,000 | 20% | 20% | 20% | 10% | 10% |
| Rs 7,50,000 - Rs 9,00,000 | 20% | 20% | 20% | 15% | 10% |
| Rs 9,00,000 - Rs 10,00,000 | 20% | 20% | 20% | 15% | 15% |
| Rs 10,00,000 - Rs 12,00,000 | 30% | 30% | 30% | 20% | 15% |
| Rs 12,00,000 - Rs 12,50,000 | 30% | 30% | 30% | 20% | 20% |
| Rs 12,50,000 - Rs 15,00,000 | 30% | 30% | 30% | 25% | 20% |
| >Rs 15,00,000 | 30% | 30% | 30% | 30% | 30% |
How to Reduce Tax on 10 Lakhs Salary
You should understand your salary structure to save more on income tax for 10 lakhs.
A salary qualifies for a variety of grants and tax exemptions. The portion of salary subject to taxation and not covered by any exemptions is known as Taxable Income. As a result, your salary component may also include different tax-exempt benefits. Therefore, your taxable income will be the balance of your salary.
Thus-
- Salary - Exemptions = Taxable Salary Income
- Taxable Salary Income - Deductions = Net Taxable Income
Therefore, maximizing Exemptions and Tax Deductions can reduce your Tax Burden.
You may also want to know How to Save Tax in India? |
Salary Exemptions Permitted Under Income Tax
Several salary components qualify for Tax Exemptions, including-
|
S.No. |
Salary Element |
Taxability |
|
1. |
Basic Salary |
Completely-Taxable |
|
2. |
Dearness Allowance |
Completely-Taxable |
|
3. |
HRA or House Rent Allowance |
Tax Exemption Up to A Specific Extent |
|
4. |
LTA or Leave Travel Allowance |
Exemption of Travel Ticket Costs for 2 Trips in 4 years Under 10(5) |
|
5. |
Mobile/Internet Allowance |
An Exemption is Allowed If Utilized Primarily for Office Purposes Along with Submitted Proofs or Bills |
|
6. |
Education Allowance for Children |
Per Child, Rs 4800 and a Maximum of 2 Children |
|
7. |
Food Allowance |
Rs 50 Per Meal and a Maximum of 2 Meals a Day |
|
8. |
Standard Deductions |
Rs 50,000 Will be Given to Everyone Without Restrictions |
|
9. |
Professional Tax |
It varies from State to State but Typically is Rs 2,400 |
Salary Deductions Permitted Under Income Tax
If you are wondering how to save tax for salary above 10 lakhs, understand that several salary components qualify for Tax Deductions when you plan your taxes for a salary of more than Rs 10 lakhs, including-
|
S.No. |
Salary Element |
Taxability |
|
1. |
On Policy Premium of Your Health Insurance (Under Section 80D) |
Tax Deductions of Rs 25,000 for you, your Spouse, and any dependent children and Rs 25,000 for Parents, along with Rs 50,000 if aged 60 and above |
|
2. |
On Loan for Higher Education (Under Section 80E) |
Loans are taken for the higher education of you, your Spouse, your dependent Children, or a Student over whom you have legal custody and are subject to an interest deduction for 8 years beginning with the year of repayment |
|
3. |
Charity Donations (Under Section 80G) |
50%-100% of the amount that qualifies |
|
4. |
Investments are Made in Tools of Tax Saving (Under Section 80C) |
A yearly tax benefit of Rs 1,50,000. You have a variety of assets to choose from, including the Employees Provident Fund (EPF), Public Provident Fund (PPF), Equity Linked Savings Scheme (ELSS), Sukanya Smriddhi Yojana (SSY), National Savings Certificate (NSC), Fixed Deposit for 5 Years, and more |
|
5. |
On Disabled Dependent Treatment Cost (Under Section 80DD) |
You are eligible for tax relief of Rs 75,000 on a 40% disability and Rs 1,25,000 on an 80% disability if you have dependents with disabilities for whom you pay medical expenses |
|
6. |
Deductions are Available on Home loans |
Deductions of up to Rs 1.5 lakhs in Principal Amount under Section 80C and up to Rs 2 lakhs in Interest Amount under Section 24b |
|
7. |
Life Insurance Policy Maturity Amount |
The maturity profits are tax-exempt if the sum assured is 20% for policies issued before April 1, 2012; 10% for policies issued after April 1, 2012; and 15% for policies issued for people with disabilities or diseases after April 1, 2013 |
How to Save Tax for Salary above 15 Lakhs
To save tax for salary above 15 lakhs, you can get a deduction under various sections of the Income Tax Act, by investing in various investment options. It can be done by opting for ELSS mutual funds, ULIP, EPF, Term plan insurance, etc.
Conclusion
In conclusion, choosing the old tax system and utilizing all available deductions and exemptions on tax-saving investments is the best way to reduce your tax liability for a salary above Rs. 10 lakhs. Alternatively, you can file your income tax return using the new tax system. However, you cannot take advantage of any carried-forward losses or tax-saving investment deductions once chosen. Thus, carefully considering all components of your income is recommended.
We hope this blog has helped you better understand the tax deduction and exemption aspects of income tax and how you can reduce your tax liability if you are liable to pay income tax above 10 lakh.
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Disclaimer: This blog is solely for educational purposes. The securities/investments quoted here are not recommendatory.
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Research Analyst - Himanshu Sinha