How to Save Tax For Salary Above 10 Lakhs?

What are the Income Tax Slabs under New Regime vs. Old Regime?

An essential part of planning your taxes is to choose the regime that benefits you the most. Here are the slab rates prevailing under both the old and the new tax regimes -

The Slab Rates Under the New Tax Regime as Per Budget 2023

As per the latest amendment introduced in the Budget 2023, the revised tax rates under the new regime are as follows -

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How is Taxable Salary Calculated?

Your total annual income is adjusted against various exemptions and deductions to arrive at your taxable salary. Let us understand the salary structure -
Annual Salary - Exemptions = Taxable Salary
Taxable Salary = Income - Deductions = Net Taxable Salary

*Please note that most exemptions and deductions are available only in the old tax regime.

What are Exemptions From Salary?

Here is the basic structure of an individual’s CTC and the exemptions thereof -

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What are the Deductions Available?

Below are the various deductions available under the old tax regime -

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How is Tax Liability Calculated Under the Old Tax Regime?

Various deductions are available under the old tax regime. Given below is the tax calculation under the old tax regime. The below example shows how to save tax on a Income above 10 lakhs.

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How is Tax Liability Calculated Under the New Tax Regime?

Unlike the old Income Tax regime, the new regime provides only a few deductions. Below are the deductions available under the new regime as per Budget 2023 -

• Standard Deduction - ₹50,000
• Section 80CCD(2) - Employer’s contribution to NPS
• Section 80CCH - Investment made in Agniveer corpus

Tax on 10 lakh income can be calculated as follows -

If you are confused as to which regime to choose to minimize your tax liability, hire a CA now and get the best tax planning advice.

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How to avoid paying taxes on a 10 Lakh Salary?

To achieve a tax-free status on a ₹10 lakh salary under the previous tax system in India, one can strategically utilize various exemptions and deductions. Here’s a breakdown:

Starting with the gross salary of ₹10,00,000, exemptions and deductions play a crucial role:

Exemptions:

• House Rent Allowance (HRA): Considering the HRA component, the least of three factors can be exempted.
• Leave Travel Allowance (LTA): Travel expenses during leave are deductible.

Deductions:

• Section 80C: Investments in EPF, PPF, Life Insurance Premiums, etc., up to ₹1,50,000 are deductible.
• Section 80D: Health insurance premiums for self and family are deductible, up to ₹25,000.
• Section 80E: Interest on education loans is deductible.
• Section 80G: Donations to specified funds are deductible.
• Section 24(b): Interest on a home loan for a self-occupied property is deductible up to ₹2,00,000.
• Standard Deduction: A standard deduction of ₹50,000 is allowed.

Considering hypothetical figures:

• HRA Exemption: ₹1,20,000
• LTA Exemption: ₹20,000
• Section 80C Deductions: ₹1,50,000
• Section 80D Deductions: ₹25,000
• Standard Deduction: ₹50,000

Taxable Income = Gross Salary - (HRA Exemption + LTA Exemption) - (Section 80C Deductions + Section 80D Deductions) - Standard Deduction

With a taxable income of ₹6,35,000, the tax liability before cess would be:

Up to ₹2,50,000: Nil
₹2,50,001 to ₹5,00,000: 5% of ₹2,50,000 = ₹12,500
₹5,00,001 to ₹6,35,000: 20% of ₹1,35,000 = ₹27,000

Total tax before cess = ₹12,500 + ₹27,000 = ₹39,500

While you can't claim rebate under Section 87A since your taxable income exceeds ₹5,00,000, further deductions like Section 80E for education loan interest or Section 24(b) for home loan interest could potentially reduce your tax liability to zero.

Now you know how you can save taxes on a salary above ₹10 lakh; if you still need help calculating your taxes while e filing income tax return, our tax experts can help you calculate your taxes and maximize your tax savings. Don’t wait for the last date to file ITR; Book eCA Today!

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