How to Save Tax for Salary above 10 Lakhs

17 January 2023
5 min read

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-

Annual Income

Old Tax Regime

New Tax Regime

Up to Rs 2.5 lakhs

Nil

Nil

>2.5 lakhs – Rs 5 lakhs

5% (however, full rebate)

5%

>5 lakhs – Rs 7.5 lakhs

20% + Rs. 12,500

10% + Rs.12,500

>7.5 lakhs – Rs 10 lakhs

20% + Rs. 12,500

15% + Rs.37,500

>10 lakhs – Rs 12.5 lakhs

30% + Rs 1,12,500

20% + Rs.75,000

>12.5 lakhs – Rs 15 lakhs

30% + Rs 1,12,500

25% + Rs.1,25,000

>15 lakhs and above

30% + Rs 1,12,500

30% + Rs.1,87,500

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, ₹4800 and a Maximum of 2 Children

7.

Food Allowance

₹50 Per Meal and a Maximum of 2 Meals a Day

8.

Standard Deductions

₹50,000 Will be Given to Everyone Without Restrictions

9.

Professional Tax

It varies from State to State but Typically is ₹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 ₹10 lakhs, including-

S.No.

Salary Element

Taxability

1.

On Policy Premium of Your Health Insurance (Under Section 80D)

Tax Deductions of ₹25,000 for you, your Spouse, and any dependent children and ₹25,000 for Parents, along with ₹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 ₹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 ₹75,000 on a 40% disability and ₹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 ₹1.5 lakhs in Principal Amount under Section 80C and up to ₹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.

You May Also Be Interested to Know-

1.

Top 10 Benefits of ITR Filing in India

2.

10 Best Tax-Saving Instruments and Their Returns

3.

Reasons You Can Get an Income Tax Notice

4.

Why is it Important to File Tax Returns

5.

Saving Tax at The Last Moment? Here's How Early Tax-Saving Helps

Disclaimer: This blog is solely for educational purposes. The securities/investments quoted here are not recommendatory.

To read the RA disclaimer, please click here
Research Analyst - Himanshu Sinha

Do you like this edition?
LEAVE A FEEDBACK
ⓒ 2016-2023 Groww. All rights reserved, Built with in India
MOST POPULAR ON GROWWVERSION - 3.7.0
STOCK MARKET INDICES:  S&P BSE SENSEX |  S&P BSE 100 |  NIFTY 100 |  NIFTY 50 |  NIFTY MIDCAP 100 |  NIFTY BANK |  NIFTY NEXT 50
MUTUAL FUNDS COMPANIES:  ICICI PRUDENTIAL |  HDFC |  NIPPON INDIA |  ADITYA BIRLA SUN LIFE |  SBI |  UTI |  FRANKLIN TEMPLETON |  KOTAK MAHINDRA |  IDFC |  DSP |  AXIS |  TATA |  L&T |  SUNDARAM |  PGIM |  INVESCO |  LIC |  JM FINANCIAL |  BARODA PIONEER |  CANARA ROBECO |  HSBC |  IDBI |  INDIABULLS |  MOTILAL OSWAL |  BNP PARIBAS |  MIRAE ASSET |  PRINCIPAL |  BOI AXA |  UNION KBC |  TAURUS |  EDELWEISS |  NAVI |  MAHINDRA |  QUANTUM |  PPFAS |  IIFL |  Quant |  SHRIRAM |  SAHARA |  ITI