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How to Save Tax for Salary above 15 Lakhs in India?

Navigating taxes* on a salary above 15 lakhs demands precision. Understanding tax slabs, leveraging exemptions, and choosing the right regime is key. Exploring avenues like PF, ELSS, and NPS can significantly bolster savings.

Navigating the complex taxation landscape in India can be daunting, especially when your annual income exceeds the 15 lakh rupee mark. As your earnings rise, so does your tax* liability, making it crucial to employ effective tax-saving strategies.

In this informative article, we will talk about the saving tax for individuals with a salary exceeding ₹15 lakhs. From understanding the latest tax slabs and exemptions to exploring tax saving investments in India like PPF, ELSS, and NPS, we will provide you with actionable insights, tips and ways to save tax in India and further optimise your tax planning, ensuring your earnings stay where it belongs – in your pocket.
 

So, let us get started!

Tax Slabs Under the Old and New Tax Regime

While the old regime offers various deductions not present in the new system, it is important to note that the latter boasts lower tax rates. It is worth highlighting that the deductions discussed in this article are exclusive to the old regime.
 

Old Tax Regime
 

Income Range

Tax Rate

< ₹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%

> ₹20 lakhs

30%

 

 

New Tax Regime

 

Income Range

Tax Rate

< ₹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%

> ₹15 lakhs

30%


Now, prior to exploring any tax-savings option, gaining a clear understanding of your tax liability is paramount. The current tax regime places individuals with a salary of ₹15 lakhs in the 30% bracket.

Calculating income tax entails considering factors like the basic exemption limit, standard deduction, and the applicable tax rates for varying income brackets.

Tax Saving Provisions as Per the Indian Income Tax Act

Your salary has various components that are tax-exempt. The calculation of your net taxable income is derived through the following steps:
 

  • Salary - Exemptions = Taxable Salary Income.
  • Taxable Salary Income - Deductions = Net taxable income.
     

Therefore, if you fall within the above ₹15 lakh tax bracket, you have the opportunity to claim tax deductions and exemptions from the following sources:
 

 

Tax Exemptions

 

Components of Salary

Taxability

Basic Salary

Entirely taxable

Dearness Allowance (DA)

Entirely taxable

House Rent Allowance (HRA)

Exempt up to a specified limit

Leave Travel Allowance (LTA)

Actual travel expenses exempt for 2 trips in 4 years under Section 10(5)

Reimbursement for Mobile/Internet

Exempt if primarily used for office purposes, with valid proofs/bills submitted

Child’s Education and Hostel Allowance

Up to ₹4800 per child (maximum 2 children)

Food Allowance

Up to ₹50 per meal (maximum 2 meals a day)

Standard Deduction

Fixed deduction of ₹50,000 (Applicable without restrictions)

Professional Tax

₹2,400 (Varies based on state regulations)

 

 

Tax Deductions

When devising your tax strategy for a salary exceeding ₹15 lakhs, deductions can be claimed for the following:
 

Deductions 

Limits and Eligibility

Health Insurance Premium (Section 80D)

Self, spouse, and dependent children: ₹25,000 (₹ 50,000 if aged 60 and above)

Parents: ₹25,000 (₹50,000 if aged 60 and above)

Education Loan Interest (Section 80E)

Deductible interest for 8 years from the year of higher education loan repayment

Charity Donations (Section 80G)

Eligible amount: 50% or 100%

Tax-saving Investments (Section 80C)

Tax benefits up to ₹ 1,50,000 per year. Options include EPF, PPF, ELSS, home loan, NSC, and more.

Costs for Disabled Dependents (Section 80DD)

40% disability: ₹ 75,000

80% disability: ₹ 1,25,000

Home Loan Payments (Principal and Interest)

Principal: Up to ₹ 1.5 lakhs (Section 80C)

Interest: Up to ₹ 2 lakhs (Section 24b)

Life Insurance Maturity Amount (Tax Exempt)

Maturity proceeds tax exempt if sum assured is - 20% (policies issued before 1st April 2012)

10% (policies issued after 1st April 2012)

15% (policies issued after 1st April 2013 for individuals with disability or disease)

How to Save Tax for Salary Above 15 Lakhs

With higher earnings comes an increased tax liability, prompting the need for astute financial strategies. Here are a few of those which you need to keep in mind while saving tax on 15 lakh income:
 

  • Understanding Tax Slabs and Exemptions

    Before delving into tax-saving avenues, it is imperative to understand the tax structure and the tax deduction on salary above 15 lakhs. Individuals with a salary above 15 lakhs fall into the 30% tax bracket (both old and new tax regimes).
    The calculation involves deducting exemptions from the total salary to arrive at taxable income. This understanding forms the foundation for effective tax planning.
     

  • Opting for the Right Tax Regime

    Choosing between the old and new tax regimes is a crucial decision. The old regime offers deductions that are absent in the new one, but the latter boasts lower tax rates. Individuals must evaluate their financial situation to determine which regime aligns better with their interests.
     

  • Leveraging Exemptions

    Salary structures often contain components that are exempted from taxation. Understanding and maximising these exemptions is a fundamental aspect of tax planning. Components like House Rent Allowance (HRA), Leave Travel Allowance (LTA), and certain reimbursements can significantly reduce taxable income.
     

  • Utilising Deductions

    Deductions play a pivotal role in tax planning. They serve as a means to reduce taxable income and, consequently, the overall tax liability. Under the old regime, deductions are available for various expenses like tuition fees, home loan interest, and contributions to provident funds.
     

  • Investing in Provident Funds (PF)

    For individuals with salaries above 15 lakhs, investing in provident funds can be a strategic move. Contributions to the Employee Provident Fund (EPF) and Public Provident Fund (PPF) help build a retirement corpus and offer tax benefits. The interest earned on these funds is tax-free.
     

  • Exploring Equity-Linked Savings Schemes (ELSS)

    ELSS is a tax-saving mutual fund that invests primarily in equities2. It offers the dual benefit of potentially high returns and tax savings under Section 80C of the Income Tax Act. With a lock-in period of just three years, ELSS provides flexibility compared to other tax-saving options.
     

  • National Pension System (NPS)

    The National Pension System is an attractive option for long-term tax planning. Contributions to NPS are eligible for deductions under Section 80CCD(1B), which is over and above the 80C limit. Additionally, it offers a well-structured retirement savings avenue.
     

  • Maximising Health Insurance Benefits

    Investing in a comprehensive health insurance policy not only provides financial security but also offers tax benefits. Premiums paid towards health insurance for self, family, and parents are eligible for deductions under Section 80D.
     

  • Consideration of Long-term Capital Gains

    Understanding the tax implications of long-term capital gains is crucial for individuals with substantial investments in equities and real estate. Strategies like tax-loss harvesting and investing in tax-saving bonds can help mitigate the tax impact.

Conclusion

In the Indian taxation system, a salary above 15 lakhs demands a nuanced approach. Understanding tax slabs, leveraging exemptions, and judiciously choosing between regimes form the bedrock of efficient planning. Exploring investment avenues like PF, ELSS, and NPS under Section 80C can significantly bolster savings.

Additionally, maximising deductions and considering long-term capital gains strategies further fine-tuning the process. By employing these strategies, individuals can optimise their tax savings and secure their financial future.

With diligent planning and informed decisions, one can confidently navigate the complex tax landscape, ensuring every rupee is put to its best use.

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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

How can I determine which tax regime, old or new, is more advantageous for me if my salary exceeds 15 lakhs?

The decision hinges on your specific financial situation. The old regime offers deductions not available in the new one, but the latter boasts lower tax rates. Evaluate your exemptions, deductions, and potential investments to make an informed choice.

Are there any limits on contributions to Provident Funds (PF) and Voluntary Provident Funds (VPF) for individuals with salaries over 15 lakhs?

While there is a statutory limit on Employee Provident Fund (EPF) contributions, individuals can contribute a higher percentage of their salary to VPF, thus increasing both savings and tax benefits.

How do Equity-Linked Savings Schemes (ELSS) compare to other tax-saving options for individuals with salaries exceeding 15 lakhs?

ELSS offers the potential for higher returns due to its equity-oriented nature and tax benefits under Section 80C. Its three-year lock-in period provides more flexibility than other long-term investment options, making it an attractive choice for tax planning 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.