How to Save Tax for Salary above 50 Lakhs?

Deductions Under the Old Tax Regime

Before learning about the deductions, have a look at the tax brackets as per the old tax regime: 
 

The deductions that were included under the old tax regime are as follows: 
 

• Standard deduction of ₹50,000
  

• Deduction for investment in life insurance premium (Section 80C)

• Deduction for investment in pension schemes (Section 80CCD(1) and Section 80CCD(1B))

• Deduction for investment in public provident fund (Section 80C)

• Deduction for investment in national saving certificate (Section 80C)

• Deduction for investment in equity-linked savings schemes (Section 80C)

• Deduction for interest on home loan (Section 80C)

• Deduction for tuition fees for children's education (Section 80C)

• Deduction for medical insurance premium (Section 80D)

• Deduction for donation to certain charitable institutions (Section 80G)

• Deduction for investment in infrastructure bonds (Section 80CCF)

• Deduction for investment in a savings account in the post office (Section 80TTA)

• Deduction for interest on savings account (Section 80TTA)

Deductions Under the New Tax Regime

The tax brackets under the new tax regime are given below: 
 

The new tax regime has fewer deductions as compared to the old one. Have a look at the deductions under the new tax regime below:  
 

• Standard deduction of ₹50,000
  

• Deduction for employer's contribution to NPS account [Section 80CCD(2)]

• Deduction for additional employee cost (Section 80JJA)

• Deduction for interest on a home loan on the let-out property (Section 24)

• Deduction for family pension income (Section 57(iia))

• Deduction for the amount paid or deposited in the Agniveer Corpus Fund under Section 80CCH(2)

Which Regime is Better?

Whether the new or old tax regime is better for you depends on your circumstances, such as your income level, investment patterns, and other deductions you are eligible for.
 

The new tax regime may be a better option if you have a low investment and are not eligible for many deductions. 
 

However, the old tax regime may be a better option if you have high investments and are eligible for many deductions.

How to Save on Income Tax Above 50 Lakhs Annual Salary?

Whether you're a seasoned professional or a rising star, the proven principles of investments discussed here can empower you to make informed financial decisions.
 

Make sure you understand these thoroughly in order to get the most benefits and save tax on 50 lakh salary effectively:
 

• Explore Tax-Saving Avenues

  Diving into tax-saving instruments stands out as a highly efficient method for minimising your tax liability. According to section 80C of the Income Tax Act, 1961, you're eligible for deductions of up to ₹1.5 lakh by strategically allocating funds into a range of tax-saving avenues.

   

  Among the favoured options are the ever-reliable Public Provident Fund (PPF), the versatile National Pension System (NPS), the growth-oriented Equity-Linked Savings Scheme (ELSS), and the secure haven of tax-saving fixed deposits (FDs). 

   

  These instruments serve as effective tax shields and present opportunities for reasonable returns, ensuring your financial portfolio gains traction.

• Optimise Section 80D Deductions

  Prioritising health insurance isn't just a prudent financial move but also a tax-savvy one. Section 80D of the Income Tax Act allows you to claim deductions on health insurance premiums paid for yourself, your spouse, children, and parents.

   

  For individuals below 60 years, the maximum deduction limit stands at ₹25,000, whereas senior citizens enjoy an elevated limit of ₹50,000. 

   

  This provision ensures your financial well-being and delivers a welcomed reduction in your tax liability, promoting both fiscal responsibility and security.

   

• Maximise Home Loan Benefits 

  Owning a home comes with its financial benefits, especially regarding tax deductions. Sections 80C and 24(b) of the Income Tax Act offer avenues for claiming deductions on your home loan's principal and interest payments.

   

  For a self-occupied property, you're eligible for a deduction of up to ₹2 lakh on the interest paid annually. Additionally, under Section 80C, you can claim up to ₹1.5 lakh on the principal repayment.

   

  If you've chosen to rent out the property, you can avail the full interest paid on the home loan as a deduction from your rental income. This translates to tax savings on a 50 lakh income and places you on the path to owning a valuable asset. 

   

  So, investing in a home loan not only provides tax benefits but also facilitates the acquisition of a substantial asset.

   

• Optimise House Rent Allowance (HRA) Benefits

  If you currently reside in a rented accommodation and receive HRA as a component of your salary, exploring exemptions available under Section 10(13A) is advantageous.

   

  The exemption is granted based on the least of the following three amounts:

  1. Actual HRA received,

  2. 50% of your salary (if residing in a metro city) or 40% (if in a non-metro city),

  3. Rent paid to exceed 10% of your salary.

  You can effectively lower your taxable income by actively paying rent and capitalising on HRA exemptions.

   

  It's important to note that the tax on a 50 lakh salary in India can vary depending on the deductions and exemptions one avail. Leveraging the provisions of the Income Tax Act can significantly mitigate one's tax liability, ensuring a more financially secure future.

   

• Utilise Leave Travel Allowance (LTA)

  Leave Travel Allowance (LTA) is an additional tax-saving perk employers offer. It permits you to claim a deduction for expenses related to domestic travel for both yourself and your family. 

   

  This benefit can be availed twice within a four-year block, provided you furnish the relevant travel receipts for verification.

   

  It's important to note that LTA exclusively pertains to domestic travel and does not apply to international trips. Therefore, planning your domestic vacations can enable you to maximise the LTA benefit, resulting in substantial tax savings. 

   

  By capitalising on this provision, you not only get to enjoy memorable trips but also bolster your financial well-being.

   

• Embrace the Perks of the National Pension System (NPS)

  For individuals with substantial incomes, the National Pension System (NPS) is a stellar choice for tax savings and retirement planning. Section 80CCD(1B) of the Income Tax Act grants an additional deduction of up to ₹50,000 for investments made in NPS.

   

  This scheme provides a tax-saving avenue and presents the advantage of compounding returns over an extended period. 

   

  By opting for NPS, you reduce your tax liability and lay a strong foundation for a financially secure and prosperous retirement.

   

• Strategise Your Approach to Capital Gains

  When you've ventured into investments like stocks, mutual funds, or real estate, it's crucial to address potential capital gains taxes on your profits. 

   

  However, you can proactively manage your capital gains by considering tax-efficient alternatives like equity-linked savings schemes (ELSS), the National Pension System (NPS), or real estate. 

   

  These avenues facilitate deductions under Sections 80C and 80CCD and mitigate your capital gains tax liability. This thoughtful approach ensures you maximise your investments while optimising your tax position.

Tax Above 50 Lakhs - Planning Provisions 

For those with salaries over 50 lakhs, smart tax planning involves utilising exemptions and deductions allowed by the Income Tax Act. 
 

Understand your salary structure, accounting for tax-exempt allowances. Deduct these from your salary to find your taxable income. Then, apply further deductions to reach your net taxable income. 
 

This strategic use of exemptions and deductions maximises tax savings and effectively allows you to manage your tax liabilities within legal bounds.
 

Tax Exemptions

You can discern your salary components within the CTC, clearly outlined as follows:
 

Tax Deductions

When strategising tax planning for an income surpassing 10 lakhs, you qualify for deductions on the following items:
 

Efficient tax-saving involves strategic investments in tax-saving instruments and a comprehensive understanding of various tax provisions to make informed decisions. 
 

Consulting a Chartered Accountant (CA) is highly recommended. They can provide expert guidance on the array of tax-saving options available and assist you in optimising the use of tax provisions. 
 

A tax expert is invaluable in helping you plan your investments and ultimately reducing your tax liability.

To Summarise

Navigating the tax landscape for incomes above 50 lakhs requires careful planning and astute decision-making. Leveraging exemptions, deductions, and tax-saving instruments can significantly lighten the tax burden. 
 

Remember, effective tax planning ensures compliance with legal norms and paves the way for a more secure and prosperous financial future. By implementing these strategies, you can confidently stride towards a fiscally empowered tomorrow.