How to Save Tax for Salary Above 10 Lakhs

If your salary exceeds Rs. 10 lakhs, Opting for the old tax scheme while utilising all available deductions and exemptions through tax-saving investments offers the most effective strategy to save your tax.
How to save tax for salary above 10 lakhs
3 min
25-June-2024

To save tax for salary above 10 lakhs, investments in instruments such as EPF, PPF, and life insurance premiums can be deducted up to a maximum of ₹1,50,000 from taxable income. Additionally, Section 80D allows for deductions on health insurance premiums paid for oneself and family members, with a cap of ₹25,000. For those repaying education loans, Section 80E provides deductions on the interest paid. Lastly, under Section 80G, donations made to specified funds and charities are eligible for deductions, thereby incentivizing contributions to social causes while reducing taxable income.

It is always a proud feeling to have worked hard and earn a good salary. A good salary is instrumental to designing an effective financial plan, as you can save more and ensure an adequate amount for future expenses. However, with a good salary comes the liability to pay taxes yearly, which can reduce your savings by a hefty margin. It is important to file your income tax returns every year and pay taxes, but you can ensure a reduced tax liability through various tax-saving methods.

This blog will help you learn how to save tax for salary above Rs. 10 lakhs to increase your savings by reducing your tax burden.

What are the income tax slabs under new regime vs. old regime?

In the Union Budget of 2020, the Indian government introduced a new tax regime, allowing taxpayers to choose the most suitable option. Here are the income tax slabs for FY 24-25 under the new regime and the old regime:

Annual income New tax regime Old tax regime
Up to Rs. 2.5 lakh NIL NIL
Rs. 2.5 lakh - Rs. 5 lakh 5% 5%
Rs. 5 lakh - Rs. 7.5 lakh 10% 20%
Rs. 7.5 lakh - Rs. 10 lakh 15% 20%
Rs. 10 lakh - Rs. 12.5 lakh 20% 30%
Rs. 12.5 lakh - Rs. 15 lakh 25% 30%
Above Rs. 15 lakh 30% 30%

 

Slab rates under the old tax regime as per budget 2024

Here are the rates under the old tax regime as per budget 2024:

Income Range Rate
Up to Rs. 2.5 lakh NIL
Rs. 2.5 lakh - Rs. 5 lakh 5%
Rs 5 lakh - Rs. 10 lakh 20%
Above Rs. 10 lakh 30%

 

Slab rates under the new tax regime as per budget 2024

Here are the tax rates under the newly introduced tax regime as per budget 2024:

Income range Rate
Up to Rs. 3 lakh NIL
Rs. 3 lakh - Rs. 6 lakh 5%
Rs. 6 lakh - Rs. 9 lakh 10%
Rs. 9 lakh - Rs. 12 lakh 15%
Rs. 12 lakh - Rs. 15 lakh 20%
Above Rs. 15 lakh 30%


Also read about:
What is long-term capital gains tax

What are the deductions available?

Deductions available under the old tax regime are:

Section 80D - health insurance premium Rs. 25,000 for self, spouse, and dependent children.Rs. 50,000 if above 60 years of age.Parents: Rs. 25,000 and Rs. 50,000 if above 60 years of age.
Section 80 E-education loan Deduction for 8 years from the year of repayment of education loan taken for self, spouse, dependent children, or for a student for whom the individual is a legal guardian.
Section 80G - donating to charity 50% of 100% of the donated amount for notified institutions.
Section 80C investing in tax saving instruments Tax benefits up to Rs. 1.5 lakh. Some investing options include: - Public Provident Fund (PPF) - Employees’ Provident Fund (EPF) - Equity Linked Saving Scheme funds (ELSS)- Home loan repayment and Stamp duty - Sukanya Smriddhi Yojana (SSY)- National Savings Certificate (NSC)- Fixed Deposit for 5 years, and more
Section 80DD- costs to treat disabled dependents If you bear the medical cost for disabled dependants, you are eligible for tax relief: - 40% disability: Rs. 75,000 - 80% or severe disability: Rs. 1.25 lakh
Home loan payments Principal amount: Up to Rs. 1.5 lakh u/s 80CInterest amount: Up to Rs. 2 lakh paid under section 24b
The maturity amount of a Life Insurance Policy You can take a tax benefit on the maturity proceeds if the sum assured is less than: - 20% for policies issued before 1 April 2012 - 10% for policies issued after 1 April 2012 - 15% for policies issued after 1 April 2013 for a person with a disability.

 

How to save taxes on a 10 lakh salary?

Understanding how to save tax for a salary above Rs. 10 lakh is important to reduce your tax liability. Saving taxes on a Rs. 10 lakh annual salary involves leveraging various deductions, exemptions, and investment options available under the Indian Income Tax Act. Here is a detailed guide:

  • Understand your tax liability: Review your total earnings in the financial year and ensure you understand which tax slab will apply. Also, review your investments and earnings from other sources to get a better idea of your tax liability.
  • ITR form: There are numerous ITR forms available for various types of individuals. Review and understand which ITR form applies to you based on the nature of your earnings.
  • Tax deductions: Sections such as 80C provide tax deductions up to Rs. 1.5 lakh. Ensure that you properly understand eligible tax deductions to reduce your tax liability as much as possible. These deductions are the best options to save tax on a Rs. 10 lakh salary.

Also read about: What are short term capital gains

How is tax liability calculated under the old tax regime?

Here is how tax liability is calculated under the old tax regime:

Particulars Amount (in Rs.)
Gross salary 10,00,000
Less: Standard deduction 50,000
Net Salary after standard deduction 9,50,000
Less: Section 80C deductions 1,50,000
Net Salary after section 80C 8,00,000
Less: Section 80D deductions 25,000
Net Salary after section 80D 7,75,000
Less: Section 80TTA deductions 10,000
Net Salary after section 80TTA 7,65,000
Less: Section 24(b) deductions 2,00,000
Net Taxable income 5,65,000
Less: Additional NPS contribution (Section 80CCD(1B)) 65,000
Final taxable income 5,00,000

 

Tax calculation Amount (in Rs.)
Income up to Rs. 2.5 lakh NIL
Income from Rs. 2.5 lakh - Rs. 5 lakh 12,500
Total tax payable 12,500
Less: Rebate under section 87A 12,500
Total tax liability 0

 

How is tax liability calculated under the new tax regime?

Here is how tax liability is calculated under the new tax regime:

Particulars Amount (in Rs.)
Gross salary 10,00,000
Less: Standard deduction 50,000
Net salary after standard deduction 9,50,000
Net taxable income 9,50,000

 

Tax calculation Amount (in Rs.)
Income up to Rs. 2.5 lakh NIL
Income from Rs. 2.5 lakh - Rs. 5 lakh 12,500
Income from Rs. 5 lakh - Rs. 7.5 lakh 25,000
Income from Rs. 7.5 lakh - Rs. 9.5 lakh 30,000
Total tax payable 67,500
Cess (4% on tax payable) 2,700
Total tax liability 70,200


Also read about: Short Term vs Long Term Capital Gains

Which regime is better for 10 lakh LPA to save tax?

Here is a detailed table for you to understand which regime is better for Rs. 10 lakh LPA:

Particulars Old tax regime (in Rs.) New tax regime (In Rs.)
Gross salary 10,00,000 10,00,000
Less: Standard deduction 50,000 50,000
Net salary after the standard deduction 9,50,000 9,50,000
Deductions:    
Section 80C 1,50,000 Not applicable
Section 80D 25,000 Not applicable
Section 80TTA 10,000 Not applicable
Section 24(b) 2,00,000 Not applicable
Section 80CCD(1B) 65,000 Not applicable
Total deductions 4,00,000 0
Net taxable income 5,00,000 9,50,000

 

Tax calculation Old tax regime (in Rs.) New tax regime (In Rs.)
Income up to Rs. 2.5 lakh NIL NIL
Income from Rs. 2.5 lakh - Rs. 5 lakh 12,500 12,500
Income from Rs. 5 lakh - Rs. 7.5 lakh NIL 25,000
Income from Rs. 7.5 lakh - Rs. 9.5 lakh NIL 30,000
Income above 9.5 lakh NIL NIL
Total tax payable 12,500 67,500
Less: Rebate under section 87A 12,500 Not applicable
Tax payable after rebate 0 67,500
Cess (4%) NIL 2,700
Total tax liability 0 70,200


From the above side-by-side comparison, you can see that for an Rs. 10 lakh annual salary, the old tax regime is better if you can fully utilise the available deductions and exemptions, as it can bring your total tax liability to zero. The new tax regime has lower tax rates but does not offer the same level of deductions, resulting in a higher tax liability in this scenario.

Smart tax-saving techniques for a salary of Rs. 10 lakhs

One of the most important factors under how to save tax for a salary above Rs. 10 lakhs is some tax-saving techniques. Here they are:

1. Choosing the right tax regime

Review your current financial situation, determine whether you can utilise the various deductions, and decide whether to choose the old or new tax regime. If you can make use of the available deductions and exemptions, the old tax regime might be for you.

2. Maximise section 80C deductions

Section 80C is one of the most important sections for lowering your tax liability. Analyse all the available investments, such as the National Savings Certificate (NSC) and the Public Provident Fund (PPF), ELSS Mutual Funds to ensure you fully utilise the Rs 1.5 lakh deduction.

3. Take advantage of the HRA exemption

You can claim deductions for house rent allowance (HRA) if you live in a rented house. You can claim the deductions under the old tax regime by submitting rent receipts, significantly lowering your tax burden.

4. Claim 80D deductions on health insurance premiums

If you have health insurance, you can claim deductions on the premium payment under section 80D. The premium paid for yourself, your dependent children, your spouse, and your parents are eligible.

Also read: Long Term Capital Gain Tax on Property

5. Utilise tax deductions on loans

If you have taken an education loan or a home loan, you can claim deductions on the interest payments under sections 80E and 24(b), respectively.

6. Consider other deductions

Numerous other deductions are available under various sections that you can use to lower your tax liability. Some deductions include investment in the National Pension Scheme under section 80CCD. Furthermore, you can donate to charitable trusts for tax deduction under section 80G.

Conclusion

If you have a Rs. 10 lakh salary, you may end up paying a high amount of tax if you do not do extensive tax planning. As there are numerous deductions and exemptions available, you can plan to utilise them to ensure you avoid paying higher taxes. Carefully review the old and new tax regimes, their tax slabs, and the deductions available to choose the most suitable one. Saving taxes can immensely help increase your savings and help you plan your financial future better.

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Frequently asked questions

How to save tax if salary is Rs. 10 lakhs?
You can save tax if your salary is Rs. 10 lakh by utilising various exemptions and deductions available under the Income Tax Act. For example, you can invest in instruments listed under section 80C for a maximum deduction of Rs. 1.5 lakh.
How much tax will I pay if my salary is 10 lakh?
The amount you pay as a tax on a Rs. 10 lakh salary depends on which tax regime you choose, the old or the new tax regime. Furthermore, the amount of tax also depends on the deductions and exemptions you have utilised, as they can significantly lower your tax liability.
How to avoid tax on salary?
You can avoid paying tax on your salary by utilising all the deductions available under various sections of the Income Tax Act of 1961. Using the deductions can bring your tax liability to zero, helping you avoid paying taxes on your salary.
How can I save 100% income tax?
To avoid paying tax on a Rs. 10 lakh salary, maximise section 80C deductions (Rs. 1.5 lakh) through investments like PPF, ELSS, or EPF, and claim section 24(b) home loan interest deduction (up to Rs. 2 lakh). Utilise section 80D for health insurance premiums (up to Rs. 25,000) and contribute to the NPS under Section 80CCD(1B) for an additional Rs. 50,000 deduction. Combining these deductions can reduce your taxable income below Rs. 5 lakh, making you eligible for the Section 87A rebate, effectively bringing your tax liability to zero.
How to pay zero tax on Rs. 10 lakh salary?
To pay zero tax on your Rs. 10 lakh salary, invest in various investment instruments listed under section 80C. You can also make use of other deductions and exemptions to bring your tax liability down to zero.
Which regime is better if my salary exceeds Rs. 10,00,000?
The old regime is considered better if your salary is Rs. 10,00,000, as you can take advantage of various deductions and exemptions that aren’t available in the new tax regime to bring your tax liability down to zero.
How can one claim a deduction under section 80C?
You can claim a deduction under section 80C by investing up to Rs. 1.5 lakh in specified instruments like PPF, ELSS, NSC, or contribute to pension plans like NPS. Payment of tuition fees for up to two children and principal repayment of a home loan also qualify.
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Bajaj Finance Limited (“BFL”) is an NBFC offering loans, deposits and third-party wealth management products.

The information contained in this article is for general informational purposes only and does not constitute any financial advice. The content herein has been prepared by BFL on the basis of publicly available information, internal sources and other third-party sources believed to be reliable. However, BFL cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed. 

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