Tax Saving Strategies For Salary Above 1 Crore?

Earning a salary of over Rs. 1 crore is a significant financial milestone, but it also comes with a substantial tax liability. For high-income earners in India, effective tax planning is essential to legally optimise their tax outgo while maximising savings. With the introduction of the new tax regime and its revised slabs, understanding advanced tax-saving strategies has become even more critical. This article explores actionable insights and strategies to help individuals earning above Rs. 1 crore save taxes while adhering to Indian tax laws.

The Union Budget 2025 introduced revised tax slabs under the new tax regime, offering simplified rates for taxpayers. These slabs are particularly relevant for individuals with high incomes, as they eliminate many deductions and exemptions available under the old regime.

For individuals earning over Rs. 1 crore, the surcharge rates under the new regime are capped at 25%, making it more attractive compared to the old regime, where the surcharge could go up to 37% for income above Rs. 5 crore.

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The choice between the old and new tax regimes significantly impacts the take-home salary of individuals earning Rs. 1 crore or more.

Old Tax Regime

• Allows multiple exemptions such as House Rent Allowance (HRA), Leave Travel Allowance (LTA), and deductions under Section 80C, 80D, and 24(b).
• Suitable for taxpayers with high investments and eligible deductions.

New Tax Regime

• Simplified structure with lower tax rates but no major exemptions or deductions.
• Ideal for taxpayers with minimal investments or those who prefer a straightforward approach.

For example, under the old regime, an individual earning Rs. 1 crore could claim deductions exceeding Rs. 8 lakh, significantly reducing taxable income. Conversely, the new regime offers a flat standard deduction of Rs. 75,000, which may result in a higher tax outgo for those with significant investments.

Bajaj Finance Fixed Deposit is an excellent option for allocating savings or building an emergency fund. With flexible tenures ranging from 12 to 60 months, you can invest as low as Rs. 15,000 and enjoy assured returns. Book FD. 

High-income earners can reduce their tax liability by leveraging various legal avenues. Here are some advanced strategies:

Standard deduction

A standard deduction of Rs. 50,000 is available to salaried individuals under the old tax regime, while the new regime offers an enhanced deduction of Rs. 75,000. This deduction is automatically applied and helps reduce taxable income.

Choose the most beneficial regime

Taxpayers should evaluate their financial situation and compare the old and new regimes before filing their income tax returns. The old regime is beneficial for those with substantial deductions, while the new regime suits individuals with minimal investments.

Employer’s contribution to NPS under Section 80CCD(2)

Employers can contribute up to 10% of an employee’s basic salary (14% for central government employees) to the National Pension Scheme (NPS), which is tax-exempt under Section 80CCD(2). This is an excellent way to build a retirement corpus while saving taxes.

Gift taxation

Gifting money or assets to family members can help reduce taxable income. Gifts to relatives, such as parents or children, are exempt from tax, provided they are within the permissible limits.

Deduction for interest on borrowing for let-out property

Individuals with rental properties can claim tax deductions under Section 24(b) for the interest paid on home loans. There is no upper limit for let-out properties, making this an effective strategy for high-income earners.

Gratuity and leave encashment

Under Section 10(10AA), gratuity up to Rs. 20 lakh and encashment of unused leave at retirement are tax-exempt. These exemptions can significantly reduce tax liability for salaried individuals nearing retirement.

Deduction on additional employee cost

Businesses employing new staff can claim tax deductions under Section 80JJAA. This deduction applies to the cost of additional employees, incentivising job creation while reducing taxable income.

Deduction on Agniveer Corpus Fund

Contributions to the Agniveer Corpus Fund are eligible for tax deductions under Section 80C. This is a unique benefit introduced to support the Agniveers under the Agnipath Scheme.

By integrating disciplined budgeting habits with secure investment options like Bajaj Finance Fixed Deposit, you can achieve financial stability and peace of mind. Plan smarter, save better, and grow your wealth today. Open FD.

To understand the impact of the new and old tax regimes, let us consider an individual earning Rs. 1.2 crore.

Approximate Tax computation for FY 2025-26 under old and new tax regimes:

In this example, the new tax regime results in tax savings of Rs. 1,08,716. However, the choice of regime depends on individual financial circumstances.

Please note: The above shown example is just an approximate simulation. 

Earning a salary above Rs. 1 crore requires meticulous tax planning to optimise savings. By understanding the nuances of the old and new tax regimes, leveraging deductions such as NPS contributions, and exploring strategies like gifting and home loan interest deductions, high-income earners can significantly reduce their tax liability.

Diversifying investments is also crucial for long-term financial stability. Consider secure options like fixed deposits, which offer guaranteed returns and flexibility. For instance, Bajaj Finance Fixed Deposits provide returns of up to 7.30% p.a., with a minimum deposit starting at Rs. 15,000. With flexible tenures ranging from 12 to 60 months, these FDs can complement your tax-saving and wealth-building strategies.

Explore investment options that ensure financial growth and stability, today!