Income Tax on 1 Crore

Income levels in India have been on a steady rise, with more individuals crossing the Rs. 1 crore annual income mark. This growth can be attributed to factors like salary hikes, business expansion, and the rise of startups offering lucrative employee stock options (ESOPs). However, with higher income comes greater tax obligations, and understanding the nuances of income tax on Rs. 1 crore is essential for effective financial planning.

Taxation on Rs. 1 crore income is more complex than for lower income brackets. Factors such as the choice between the old and new tax regimes, surcharge slabs, marginal relief, and various exemptions can significantly impact the final tax liability. Additionally, the structure of one's salary—fixed pay, bonuses, or ESOPs—also influences the tax payable.

In this article, we will simplify the intricacies of income tax on Rs. 1 crore, covering slab-wise calculations, take-home salary, tax-saving strategies, and compliance requirements for the financial year 2025–26.

Earning Rs. 1 crore annually puts taxpayers in the highest income bracket, which comes with unique challenges and opportunities. The primary factors that differentiate taxation at this level include:

• Surcharge rules and marginal relief: A surcharge is an additional tax levied on high-income earners. For individuals earning over Rs. 1 crore, the surcharge increases significantly, but marginal relief ensures that the additional tax does not exceed the income exceeding Rs. 1 crore.
• Tax regime selection: Taxpayers can choose between the new regime, which offers lower tax rates but no exemptions, and the old regime, which allows various deductions and exemptions.
• Tax planning challenges: High-income earners often have complex salary structures that include ESOPs, bonuses, and variable pay. These components are taxed differently, requiring careful planning to optimise tax liability.

Example:

For instance, if your annual income is Rs. 1.01 crore, the additional Rs. 1 lakh above the Rs. 1 crore threshold will attract a higher surcharge of 15%, but marginal relief will ensure that the additional tax does not exceed the excess income.

Taxpayers earning Rs. 1 crore or more should carefully evaluate their financial situation, deductions, and exemptions to choose the most beneficial tax regime.

Taxation in India is based on a slab system, which means different portions of your income are taxed at different rates. Here is a breakdown of the tax slabs applicable under the new and old tax regimes for FY 2025–26.

New tax regime slabs – FY 2025–26

Under the new tax regime, individuals benefit from lower tax rates but cannot claim most exemptions or deductions, except for a standard deduction of Rs. 50,000.

Old tax regime slabs – FY 2025–26

The old tax regime offers higher tax rates but allows taxpayers to claim over 70 exemptions and deductions, such as:

• Section 80C: Investments in PPF, ELSS, and life insurance (up to Rs. 1.5 lakh).
• Section 80D: Medical insurance premiums.
• Section 24(b): Home loan interest deduction (up to Rs. 2 lakh).
• HRA: House Rent Allowance exemption.
• NPS contributions: Additional Rs. 50,000 deduction under Section 80CCD(1B).

Surcharge slabs above Rs. 1 crore income

For individuals earning over Rs. 50 lakh, a surcharge is applicable as follows:

• 10% for income between Rs. 50 lakh and Rs. 1 crore.
• 15% for income between Rs. 1 crore and Rs. 2 crore.
• 25% for income between Rs. 2 crore and Rs. 5 crore.
• 37% for income above Rs. 5 crore.

Marginal relief:

Marginal relief ensures that the additional tax due to the surcharge does not exceed the amount by which income surpasses the threshold. For example, if your income is Rs. 1.01 crore, the surcharge on Rs. 1 crore is 15%, but marginal relief will reduce your tax liability to ensure fairness.

Numeric example

Take-home salary under the new regime

After deducting Rs. 37,34,020 as tax, and factoring in additional deductions such as provident fund contributions and professional tax, the take-home salary for an individual earning Rs. 1 crore under the new regime will be approximately Rs. 60 lakh.

Numeric example

Take-home salary under the old regime

With deductions reducing taxable income and consequently lowering tax liability, the take-home salary under the old regime is higher. After accounting for Rs. 36,18,760 in taxes and other deductions, the take-home salary is approximately Rs. 62 lakh.

Choose the old regime if:

• You have significant investments in tax-saving instruments like PPF, NPS, or ELSS.
• You pay a substantial amount in home loan interest or HRA.

Choose the new regime if:

• You prefer a simplified tax structure.
• You do not have many investments or deductions to claim.

CTC vs gross salary vs take-home – simple explanation

• CTC (Cost to Company): The total annual cost incurred by an employer for an employee, including salary, bonuses, and benefits.
• Gross Salary: The total income before tax and other deductions, excluding employer benefits.
• Take-Home Salary: The net amount received after deducting taxes, provident fund contributions, and other deductions.

Sample salary structure breakdown for a Rs. 1 crore package

Use Section 80C, 80D, 80E, 80G, and other deductions (old regime)

Invest in tax-saving instruments such as Public Provident Fund (PPF), Equity Linked Savings Schemes (ELSS), and life insurance policies under Section 80C. Similarly, claim deductions for medical insurance premiums (Section 80D), education loans (Section 80E), and donations to charitable institutions (Section 80G).

NPS Tier I – Extra Rs. 50,000 savings under Section 80CCD(1B)

By investing in the National Pension System (NPS) Tier I account, you can claim an additional deduction of Rs. 50,000 under Section 80CCD(1B). This is particularly beneficial for high-income earners looking to reduce their taxable income further.

Home loan interest + HRA + joint ownership benefits

Claiming home loan interest deductions under Section 24(b) (up to Rs. 2 lakh) and principal repayment under Section 80C can significantly reduce your tax liability. Opting for a Bajaj Finserv Home Loan can help you maximise these benefits with competitive interest rates and flexible repayment options. Additionally, if you are renting a property, you can claim HRA exemptions for further tax savings.

Individuals earning 1 crore or more must follow strict tax rules. Use the correct ITR form—ITR-2 (no business), ITR-3 (business/profession), or ITR-4 (only if eligible for presumptive taxation). Income must match AIS and TIS data, including all high-value transactions. Disclose applicable surcharge and pay advance tax on time. PAN-Aadhaar linking is mandatory. Late filing attracts fees and interest. Maintain documents like Form 16, capital gains, and bank proofs. Reporting foreign assets is compulsory.

Special Rules for Salaried Individual Earning 1 Crore+

ESOPs are taxed at exercise and sale. Perquisites like company car and club membership must be properly valued and reported.

Special Rules for Business/Profession Income ≥ 1 Crore

Tax audit under 44AB applies. Presumptive taxation is restricted. Maintain books and ensure GST alignment.

Smart structuring can significantly improve take-home pay. Split compensation wisely—keep a balanced mix of fixed salary and performance-based bonus to optimise tax timing. Use reimbursements (fuel, phone, internet) instead of fully taxable allowances. Opt for employer NPS contribution (up to 10 percent of basic) for extra tax benefit. Plan LTA for travel exemptions and include food allowance through meal cards.

Leverage employer-paid health insurance to reduce personal expenses. Understand gratuity impact, as higher basic increases long-term benefits but also tax exposure.

Example: Shifting 1 lakh from taxable allowance to reimbursements or NPS can reduce overall tax and increase net in hand.

• Choosing the wrong tax regime without comparing deductions vs lower rates
• Not using marginal relief, leading to excess tax outgo
• Incorrect TDS estimation causing large year-end tax liability
• Missing advance tax deadlines, resulting in interest penalties
• Ignoring AIS/TIS mismatches that can trigger tax notices
• Not maintaining proper HRA proof (rent receipts, landlord PAN)
• Failing to report high-value transactions like property or investments
• Overlooking additional tax benefits under employer NPS contributions
• Poor documentation of deductions and exemptions, increasing scrutiny risk
• Not reviewing Form 26AS before filing returns

A simple way to calculate tax is to break it into three parts—base tax, surcharge, and cess.

\text{Total Tax} = (\text{Base Tax} + \text{Surcharge}) + 4%\ \text{Cess}

Step-by-step approach:

1. Calculate base tax using slab rates (old or new regime).
2. Add surcharge based on income level (for income above 50 lakh, rates increase gradually up to 37 percent).
3. Apply 4 percent cess on the total of tax + surcharge.

Example:
If your base tax is 30 lakh and surcharge is 7.5 lakh:
Total before cess = 37.5 lakh
Cess (4 percent) = 1.5 lakh
Final tax = 39 lakh

Always cross-check with marginal relief rules, as they can slightly reduce your final liability near surcharge thresholds.

Understanding the nuances of income tax on Rs. 1 crore income is crucial for effective financial planning. Choosing between the old and new tax regimes, leveraging deductions, and optimising your salary structure can significantly impact your tax liability and take-home pay. By adopting smart tax-saving strategies, such as investing in NPS, claiming home loan interest deductions, and planning your salary structure, you can minimise your tax burden.

For those considering a home loan, leveraging tools like the Bajaj Finserv Home Loan EMI Calculator can help you plan your finances better and make the most of tax-saving opportunities. For complex financial situations, seeking professional advice can ensure compliance and optimal tax planning.