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How to Save Tax for Salary Above 10 Lakhs?

Maximising tax* savings on a 10 lakh salary requires a strategic understanding of salary components and exemptions. Various allowances and deductions, including those for health insurance premiums and home loans, can significantly reduce taxable income.
 

save tax

As the financial year comes to a close, many individuals find themselves grappling with the inevitable task of filing taxes*. If you are earning above ₹10 lakhs, navigating the income tax on 10 lakhs landscape can be particularly complex. 
 

The good news is that with the right knowledge and strategies, you can significantly reduce your tax liability while staying within legal boundaries. 
 

In this comprehensive blog, we will take you through the intricacies of tax planning for high-income earners. From smart investments to lesser-known deductions, we will equip you with the tools to optimise your financial portfolio and ensure you keep more of your hard-earned money.
 

But first, let us check out the income tax slabs per the old and new tax regimes to understand your tax liabilities better.

Tax Slabs as per the Old and the New Tax Regime

The new income tax regime offers a higher tax rebate limit of ₹7 lakhs, compared to ₹5 lakhs under the old regime. This means that taxpayers with an income of up to ₹7 lakhs will not have to pay any tax under the new regime.

Let us learn it better in the tables below:
 

Old Tax Regime

Income Range

Tax Rate

Up to ₹2.5 lakhs

Nil

₹2.5 lakhs to ₹5 lakhs

5%

₹5 lakhs to ₹10 lakhs

20%

₹10 lakhs to ₹15 lakhs

30%

₹15 lakhs to ₹20 lakhs

30%

Above ₹20 lakhs

30%

 

New Tax Regime

Income Range

Tax Rate

Up to ₹3 lakhs

Nil

₹3 lakhs to ₹6 lakhs

5%

₹6 lakhs to ₹9 lakhs

10%

₹9 lakhs to ₹12 lakhs

15%

₹12 lakhs to ₹15 lakhs

20%

Above ₹15 lakhs

30%

 

The new income tax regime also has a simpler structure with fewer slabs, which makes it easier for taxpayers to calculate their tax liability. 
 

However, the new regime does not allow taxpayers to claim certain deductions and exemptions available under the old regime.

Maximising Savings on Income Tax Above 10 Lakhs Salary

To effectively reduce your tax on 10 lakh income, it is crucial to have a solid grasp of your salary structure. 
 

A salary encompasses various components that may qualify for grants and tax exemptions. The portion of your salary remaining subject to taxation after accounting for these exemptions is called Taxable Income. 
 

This figure is estimated by subtracting the tax-exempt benefits from your total salary.
 

Therefore,

Salary - Exemptions = Taxable Salary Income

Further, after accounting for deductions, you arrive at your Net Taxable Income:

Taxable Salary Income - Deductions = Net Taxable Income
 

By strategically maximising your exemptions and leveraging tax deductions, you can effectively alleviate your overall burden on income tax for 10 lakhs per annum.

Income Tax-Eligible Salary Exemptions

The salary components qualifying for tax exemptions include:
 

Salary Element

Taxability

Basic Salary

Fully-taxable

Dearness Allowance

Fully-taxable

HRA or House Rent Allowance

Tax Exemption up to some extent

LTA or Leave Travel Allowance

Exemption of travel tickets for 2 Trips in 4 years Under 10(5)

Mobile/Internet Allowance

An exemption is allowed If utilised solely for official reasons, along with submitted bills and proofs

Education Allowance for Children

₹4800 per child and a maximum of 2 children

Food Allowance

₹50 per meal and a maximum of 2 meals a day

Standard Deductions

₹50,000 will be given to everyone without restrictions 

Professional Tax

It varies from State to State but usually is ₹2,400

10 Lakh Income Tax-Saving Deductions 

When aiming to optimise tax savings on salaries surpassing ₹10 lakhs, it is crucial to recognise the various compensation components eligible for tax deductions. 
 

These deductions play a pivotal role in efficient tax planning for incomes exceeding ₹10 lakhs. Key components to consider include:
 

Salary Element

Taxability

Health Insurance Premiums (Under Section 80D)

₹25,000 for self, spouse, and dependent children; ₹25,000 for parents (₹50,000 if aged 60 and above). 

Higher Education Loans (Under Section 80E)

Interest is deductible for 8 years starting from the year of repayment for higher education of self, spouse, dependent children, or a student under your legal custody.

Charitable Donations (Under Section 80G)

50%-100% of the qualifying amount.

Investments in Tax-Saving Instruments (Under Section 80C)

Up to ₹1,50,000 annually. Options include EPF, PPF, ELSS, SSY, NSC, 5-year Fixed Deposit, and more.

Treatment Expenses for Disabled Dependents (Under Section 80DD)

₹75,000 for 40% disability; ₹1,25,000 for 80% disability, for dependents with disabilities.

Home Loan Deductions

  • Principal Amount (Under Section 80C): Up to ₹1.5 lakhs.

  • Interest Amount (Under Section 24b): Up to ₹2 lakhs.

Life Insurance Policy Maturity Amount

Maturity proceeds are tax-exempt with specific conditions based on the policy issuance date and the insured person's health status.

How to Save Tax on 10 Lakh Salary – Ways to Pay NO TAX!

It is possible to pay zero tax on a ₹10 lakhs salary under the old income tax regime. 

Here are some of the deductions and exemptions that you can claim to reduce your taxable income:
 

  • Standard deduction of ₹50,000.

  • Deduction under Section 80C of up to ₹1,50,000 for investments made in certain eligible instruments, such as:

    • Life Insurance Premium

    • Provident Fund

    • National Savings Certificate

    • Equity-Linked Savings Scheme (ELSS)

    • Public Provident Fund (PPF)
       

  • Deduction under Section 80D of up to ₹25,000 for medical insurance premiums paid for self, spouse, and dependent children.

  • Deduction under Section 80TTA of up to ₹10,000 for interest paid on savings account.

  • Deduction under Section 80EE of up to ₹50,000 for interest paid on home loans for first-time home buyers.

  • Deduction for LTA (Leave Travel Allowance) of ₹40,000.

  • Deduction for HRA (House Rent Allowance) of ₹1,50,000.

  • Deduction for any reimbursements of ₹24,000.
     

If you claim the above deductions and exemptions, your taxable income will be reduced to ₹1 lakh. In this case, you will not have to pay any tax.
 

Here is an example of how the tax liability would be calculated for a taxpayer with a salary of ₹10 lakh:

Gross salary

₹10 lakh

LTA (Leave Travel Allowance)

₹40,000

HRA (House Rent Allowance)

₹1,50,000

Reimbursements

₹24,000

Standard Deductions

₹50,000

Child’s Education & Hostel Allowance

₹9,600

PT (Professional Tax)

₹2,400

Taxable Salary Income

₹7,24,000

Deductions

Section 80C

₹1,50,000

Section 80D

₹50,000

Section 80E

₹25,000

Total Taxable Income

₹4,99,000

Tax on Total Annual Income

₹12,450

Rebate (under Section 87A)

₹12,450

Total Tax Under Old Regime

₹0

 

So, as per the old tax regime, you will not have to pay any taxes! 
 

However, if you opt for the new income tax regime, you cannot claim most of the deductions and exemptions available under the old regime. 
 

The only deductions that are available under the new regime are:
 

  • Standard deduction of ₹50,000.

  • Employer's contribution to NPS under Section 80CCD (2).

  • Investment in the Agniveer Corpus Fund under Section 80CCH.
     

If you have claimed any other deductions and exemptions under the old regime, you cannot claim them under the new regime. Your taxable income will increase under the new regime, and you may have to pay more tax.
 

However, the new income tax regime does have a higher tax rebate limit of ₹7 lakh, compared to ₹5 lakh under the old regime. This means that taxpayers with an income of up to ₹7 lakh will not have to pay any tax under the new regime.

Conclusion

For individuals earning above ₹10 lakhs, opting for the old tax system and making full use of available deductions and exemptions through tax-saving investments proves to be the most effective approach in minimising tax liability. 
 

On the other hand, choosing the new tax system allows for simplified filing, but it comes at the cost of forfeiting any carried-forward losses or deductions from tax-saving investments. 
 

Therefore, it is crucial to thoroughly assess all aspects of your income before making a decision.

Want to Keep More of Your Hard-Earned Money? Speak to out expert

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Tata AIA Life Insurance

A joint venture between Tata Sons Pvt. Ltd. and AIA Group Ltd. (AIA),  Tata AIA Life Insurance  is one of the leading life insurance providers in India. We post everything you need to know about life insurance, tax savings and a variety of lateral topics such as savings and investments in this space. You can access and read a host of different blogs, articles and pages at the Tata AIA Life Insurance Knowledge Center or get in touch with us with any queries or questions!

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Frequently Asked Questions

Can I switch between the old and new tax systems if I earn above ₹10 lakhs?

Yes, you can choose between the old and new tax systems each financial year. However, it is important to note that once you opt for the new tax system, you will not be able to claim any carried-forward losses or deductions from tax-saving investments.

Are there any specific tax-saving investments particularly beneficial for individuals with salaries above ₹10 lakhs?

Absolutely. Investing in instruments like the Employees Provident Fund (EPF), Public Provident Fund (PPF), and Equity Linked Savings Scheme (ELSS) can be highly advantageous. These fall under Section 80C and can provide up to ₹1,50,000 deductions annually. 

Additionally, considering options like health insurance premiums and higher education loans can further optimise tax savings for individuals in this income bracket.

Disclaimers

  • Insurance cover is available under the product.

  • The products are underwritten by Tata AIA Life Insurance Company Ltd.

  • The plans are not a guaranteed issuance plan, and it will be subject to Company’s underwriting and acceptance.

  • For more details on risk factors, terms and conditions please read sales brochure carefully before concluding a sale.

  • This blog is for information and illustrative purposes only and does not purport to any financial or investment services and do not offer or form part of any offer or recommendation. The information is not and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.

  • Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company.

  • Every effort is made to ensure that all information contained in this blog is accurate at the date of publication, however, the Tata AIA Life shall not have any liability for any damages of any kind (including but not limited to errors and omissions) whatsoever relating to this material.

  • Tax: *Income Tax benefits would be available as per the prevailing income tax laws, subject to fulfilment of conditions stipulated therein. Income Tax laws are subject to change from time to time. Tata AIA Life Insurance Company Ltd. does not assume responsibility on tax implications mentioned anywhere in this document. Please consult your own tax consultant to know the tax benefits available to you.