Filing your tax returns is one of the most important aspects for ensuring that you adhere to tax compliance in India. The Indian government requires every earning Indian citizen to pay taxes on all the income they have earned in a financial year. The same goes for salaried employees who receive a predetermined amount every month. However, the Indian government has made provisions under the Income Tax Act of 1961 that allow taxpayers to lower their taxable income and decrease the final tax amount.
This blog will help you understand how to save tax on a salary above Rs. 15 lakh to ensure you lower your tax liability and increase your savings.
Tax slabs under old vs New regime
The Indian government introduced a new tax regime in the Union Budget 2020 and provided an option for taxpayers to choose between the old and the new tax regime. Here is the income tax slabs for FY 24-25 under the new regime and the old regime:
Tax savings for salary above 15 lakh
If you have a salary above Rs. 15 lakh, numerous components in your salary are exempted from tax. The net taxable income on your Rs. 15 lakh salary is calculated in the following ways:
Step |
Description |
1. Gross salary |
Total salary before any deductions |
2. Less: Exemptions |
Under various sections of the Income Tax Act |
Standard deduction |
Fixed deduction available to all salaried individuals |
House rent allowance |
Exempted as per applicable rules |
Other exemptions |
Leave travel allowance, etc. |
3. Net salary |
After deducting exemptions (1 - 2) |
4. Less: Deductions |
Under various sections of the Income Tax Act |
Section 80C |
Investments in ELSS, PPF, etc. |
Section 80D |
Health insurance premiums |
Section 80CCD(1B) |
NPS contributions |
Other deductions |
Interest on education loans, etc. |
5. Total deductions |
Sum of all deductions |
6. Net taxable income |
After all deductions (3-5) |
How to save tax for a salary above Rs. 15 lakhs?
Here is how you can save tax for a salary above Rs. 15 lakh:
1. Understanding tax slabs and exemptions
There are two tax regimes after the Union Budget 2020, and you have the option to choose between the two for filing your taxes. However, they both have different tax slabs and exemptions available. For example, while the tax slabs are higher in the old tax regime than the new one, it contains more exemptions that aren’t available in the new regime. Hence, it is important that you understand the tax slabs and the exemptions to determine which tax regime will help you pay a lower tax amount.
2. Opting for the right tax regime
After you have understood the tax slabs and exemptions of both tax regimes, it is vital that you choose the right tax regime. If you are looking to utilise all the deductions and exemptions available under various sections, you can opt for the old tax regime. However, if you do not want to invest in various schemes and do not have exempted expenses, you can choose the new tax regime.
3. Leveraging exemptions
Utilising exemptions is one of the most important factors in saving tax on a Rs. 15 lakh salary. Review your salary structure and understand what expenses are exempted from tax. You can lower your tax liability and claim tax exemptions on components like Leave Travel Allowance (LTA), House Rent Allowance (HRA), and certain other reimbursements.
4. Utilising deductions
Income tax deductions can significantly lower your tax liability. You can leverage the standard deduction of Rs. 50,000 and up to Rs. 1.5 lakh on section 80C options like PPF, ELSS, or life insurance. Furthermore, you can claim up to Rs. 25,000 under Section 80D for health insurance premiums and an additional Rs. 50,000 for senior citizen parents.
5. Investing in Provident Funds (PF)
Investing in Provident Funds can give you the dual benefit of tax-saving and long-term steady earnings. If you have a salary above Rs. 15 lakh, you can lower your tax liability by contributing to the Employees’ Provident Fund, as the contributions are tax deductible under section 80C. Another tax-saving option is the Public Provident Fund (PPF), where investments up to Rs. 1.5 lakh are tax-exempt under section 80C.
6. Exploring Equity-Linked Savings Schemes (ELSS)
For a salary above Rs. 15 lakh, you can invest in Equity-Linked Savings Schemes (ELSS) to lower your tax liability. Under section 80C of the Income Tax Act, investments in ELSS funds qualify for a deduction of up to Rs. 1.5 lakh annually, reducing taxable income.
7. National Pension System (NPS)
Investing in the National Pension System (NPS) is also an ideal solution to save tax for a salary above Rs. 15 lakh. Contributions made to NPS are eligible for tax deductions under section 80CCD(1) of the Income Tax Act. Taxpayers can claim deductions up to Rs. 1.5 lakh under section 80C, and an additional Rs. 50,000 under section 80CCD(1B) for contributions made exclusively to NPS.
8. Consideration of Long-term Capital Gains
Long-term capital gains tax of 20% is levied on assets held for more than three years, such as stocks and mutual funds. It is important to consider LTCG tax if you are looking to lower your tax liability. You can minimise your tax liability on LTCG through several methods, such as reinvesting LTCG into specified bonds such as REC or NHAI bonds within six months, receiving an exemption under section 54EC. Furthermore, you can invest in residential property using LTCG to qualify for exemptions under section 54 or section 54F.
Which regime is better for 15 lakh LPA to save tax?
Here is a detailed side-by-side comparison of the old and new tax regimes for you to understand which regime is better for Rs. 15 lakh LPA to save tax:
Particulars |
Old tax regime (in Rs.) |
New tax regime (In Rs.) |
Gross salary |
15,00,000 |
15,00,000 |
Less: Standard deduction |
50,000 |
50,000 |
Net salary after standard deduction |
14,50,000 |
14,50,000 |
Deductions: |
|
|
Section 80C |
1,50,000 |
Not applicable |
Section 80D |
50,000 |
Not applicable |
Section 24(b) |
2,00,000 |
Not applicable |
Section 80CCD(1B) |
50,000 |
Not applicable |
Total deductions |
5,00,000 |
50,000 |
Net taxable income |
10,00,000 |
14,50,000 |
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 |
50,000 |
25,000 |
Income from Rs. 7.5 lakh - Rs. 10 lakh |
50,000 |
37,500 |
Income from Rs. 10 lakh - Rs. 12.5 lakh |
75,000 |
50,000 |
Income from Rs. 12.5 lakh - Rs. 15 lakh |
75,000 |
62,500 |
Total tax payable |
2,62,500 |
1,87,500 |
Cess (4%) |
10,500 |
7,500 |
Total tax liability |
2,73,000 |
1,95,000 |
Here, you can see that because of the new regime's lower tax slabs, you pay lower taxes on your Rs. 15 lakh salary even when using various deductions available under the old tax regime.
Also read about: Section 80C of Income Tax Act
Tax saving under new tax regime
Here are the tax-saving options under the new tax regime:
Standard deduction |
Basic deduction for salaried individuals |
Section 80CCD(2) |
Employer contribution to NPS |
Section 80CCH |
Investments made in Agniveer corpus |
Section 57(iia) |
Family pension received |
Section 10(10C) |
Voluntary retirement |
Section 10(10) |
Gratuity |
Section 10(10AA) |
Leave encashment |
Section 24 |
Interest on a home loan on the let-out property |
Furthermore, some other deductions under the new regime are as follows:
- Transport allowance if you are a specially-abled person.
- Conveyance allowance to cover the expenses incurred for travelling as part of the employment.
Tax savings under old tax regime
Here are all the tax-saving options under the old tax regime:
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 |
|
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. |
|
50% of 100% of the donated amount for notified institutions. |
|
Tax benefits up to Rs. 1.5 lakh. Some investing options include:
|
|
If you bear the medical cost for disabled dependants, you are eligible for tax relief:
|
|
Principal amount: Up to Rs. 1.5 lakh u/s 80C Interest amount: Up to Rs. 2 lakh paid under section 24b |
|
You can take a tax benefit on the maturity proceeds if the sum assured is less than:
|
Also read: Short-term capital gains tax
How do I save tax for a 15 LPA salary without a housing loan?
Without a housing loan, you won’t be able to claim a deduction up to Rs. 1.5 lakh under section 80C and for the interest amount up to Rs. 2 lakh under section 24b. However, you can maximise other deductions under section 80C by investing in schemes such as the Public Provident Fund (PPF), Equity Linked Savings Scheme (ELSS), Employee Provident Fund (EPF), National Savings Certificate (NSC), and more, getting a tax deduction up to Rs. 1.5 lakh.
Additionally, you can contribute up to Rs. 50,000 to the National Pension System (NPS) under section 80CCD(1B) for an additional deduction. Furthermore, you can use other directions available to you in the old or the new tax regime to save tax, even if you do not have a housing loan.
Conclusion
If you earn around Rs. 15 lakh salary every year, you may end up paying a high amount of tax. However, there are numerous methods to ensure that you lower your tax liability as much as possible. Compare both tax regimes and ensure that the one you choose will help you pay a lower tax amount based on the available exemptions and deductions. Effective tax planning will help you save tax and increase your savings, which you can invest further in ideal investment instruments such as mutual funds schemes. Now that you know how to save tax for a salary above Rs. 15 lakh, you can lower your tax liability.
If you are considering investing in mutual funds, you can visit the Bajaj Finserv Platform, where you can use unique tools, such as mutual fund calculators, to compare mutual funds and invest in the most suitable schemes.
