How to save tax for salary Above 10 Lakhs
Tax planning is an essential aspect of financial management, especially for individuals with a salary above 10 lakhs. By utilizing various tax-saving strategies, one can minimize their tax liability and maximize their take-home salary. In this blog, we will explore the most effective and legitimate ways to save tax for individuals earning a salary above 10 lakhs. By implementing these strategies, you can optimize your tax savings while staying compliant with the tax laws.
Understand Income Tax Slabs rates and Deductions
To save tax effectively, it is important to have a clear understanding of the income tax slabs and deductions available to you. For the financial year 2023-2024 following are the tax slabs
income tax regime old vs new
| old tax regime | new tax regime | ||
|---|---|---|---|
| income tax slab | income tax rate | income tax slab | income tax rate |
| upto 5 lakhs | NIL | upto 2.5 lakhs | NIL |
| 5 lakhs - 10 lakhs | 20% above 5 lakhs | 2.5 lakhs - 5 lakhs | 5% above 2.5 lakhs |
| above 10 lakhs | 1 lakh + 30 % above 10 lakhs | 5 laks- 7.5 lakhs | 12.5k + 10% above 5 lakhs |
| 7.5 lakhs - 10 lakhs | 37.5k + 15% above 7.5 lakhs | ||
| 10 lakhs - 12.5 lakhs | 75k+ 20% above 10 lakhs | ||
| 12.5 lakhs- 15 lakhs | 1.25lakhs+25% above 12.5 akhs | ||
| above 15 lakhs | 1.875 lakhs +30% above 15 lakhs |
how to reduce tax on 10 lakh salary
now, after watching the chart, you have got the idea , that under which tax slab you come.In order to save tax one can claim tax deductions under various sectionss of Income Tax Act, such as section 80C, section 24(B) and more . familiarize yourself with these deductions to optimize your tax saving.
your ctc contains many components like
- basic salary
- dearness allowance(DA)
- housing rent allowance (HRA)
- leave travel allowance
- child education and hostel allowance
- food
- some standard deductions
- profeesional tax
different tax is applicable on these components, some can be fully taxable, while some can be in portion while some are not taxable.
| salary component | taxability |
|---|---|
| Basic | Fully-taxable |
| Dearness allowance | fully taxable |
| housing rent allowance | exempt upto |
| child education and hostel allowance | Rs. 4800 per children (max 2 children) |
| fooding | Rs. 50 per meal (max 2 meals a day) |
| standard deduction | Rs. 50000 (given to all without any restriction) |
| professional tax | generally Rs. 2400 |
| Leave travel allowance | Actual travel ticket expenses are exemptfor 2 tripsin 4 year |
| Mobile/internet | Exempt: only if you used for office purpose with bill |
Utilize Section 80C Deductions
Section 80C of the Income Tax Act offers several avenues for tax-saving investments and expenses. Maximize your savings by investing in instruments such as:
- life insuarance premium
- Provident funf
- Subscription to certain equity shares
- tution fees
- National savings certificate
- housing loan principal
- other various items
By investing in these instruments, you can claim deductions of up to 1.5 lakhs under Section 80C.
Section 80D for Health Insurance Premiums
Section 80D allows individuals to claim deductions for health insurance premiums paid for themselves, their spouse, children, and parents. The maximum deduction available is as follows:
- Up to 25,000 for self, spouse, and children
- Up to 50,000 for senior citizens (above 60 years)
- Additional deduction of up to 25,000 for parents
- Additional deduction of up to 50,000 for senior citizen parents
By investing in health insurance policies and claiming deductions under Section 80D, you can reduce your taxable income significantly.
Optimize House Rent Allowance (HRA) Exemptions
If you are a salaried individual living in a rented house, then you can claim exemptions on House Rent Allowance (HRA) under Section 10(13A) of the Income Tax Act. The exemption amount is the minimum of the following three conditions:
- Actual HRA received
- Rent paid minus 10% of salary
- 50% of salary (for individuals residing in metro cities) or 40% of salary (for individuals residing in non-metro cities)
By submitting proper rent receipts and rent agreement documents, you can optimize your HRA exemptions and reduce your taxable income.
Make Use of NPS Contributions under section 80CCD
The National Pension System (NPS) is an excellent tax saving investment option. Under Section 80CCD(1B), individuals can claim an additional deduction limit is up to 50,000 by investing in the NPS scheme. This deduction is over and above the limit of 1.5 lakhs available under Section 80C. By contributing to the NPS, you not only save tax but also secure your retirement.
Consider Home Loan Interest Deductions
If you have taken a home loan for first time between 1st April 2019 to 31st march 2022, you can claim deductions on the interest paid under Section 80EEA of the Income Tax Act. The maximum deduction available is up to 1.5 lakhs . Additionally, if you have let out your property, there is no upper limit on the deduction. By utilizing this deduction, you can reduce your taxable income significantly.
Explore Leave Travel Allowance (LTA) Benefits
Leave Travel Allowance (LTA) is a component of your salary that can be claimed as a tax exemption. Under Section 10(5) of the Income Tax Act, you can claim exemptions on the expenses incurred for domestic travel.
| S.NO. | SALARY ELEMENT | TAX DEDUCTION |
|---|---|---|
| 1. | payment of life insuarance premiums, provident fund, subscription to certain equity shares, tution fees, national savings certificate, housing loan principal under section 80C , annuity plan of LIC or other insurer, towards pension scheme under 80CCC pension scheme of central govt. under 80CCD(1) | combined deduction limit of Rs. 1,50,000 |
| 2. | SECTION 80CCD(1B0 Payments made to Pension scheme of central givt. , excluding deduction claimed under 80CCD(1) | MAX. LIMIT Rs. 50,000 |
| 3. | section 80CCD(2) Contribution made by employer to pension scheme of central govt. | PSU employer or others (DEDUCTION LIMIT 10% of salary) central or state govt. employer(14% of salary) |
| 4. | UNDER SECTION 80D payment made to health insurance premium and preventive health check up | for self/spouse or dependent children Rs. 25000( Rs. 50000 if any persson is senior cirizen) Rs. 5000 for preventive health check up, included in above limit for parents Rs. 25000( Rs. 50000 if any person is senior citizen) Rs. 5000 for preventive health checkup, included in above limit |
| 5. | UNDER SECTION 80D payment made towards medical expenditure icurred on senior citizen, if no premium is paid on health insuarance | for self/ spouse or dependent children deduction limit of Rs.50000 for parents deduction limit Rs. 50000 |
| 6. | UNDER SECTION 80E deduction towards interest paid on loan for higher education of self or relative | deduction on total amount paid towards interest on loan taken |
| 7. | UNDER SECTION 80EE Deduction towards interest payments made on loan taken for acquisition of residential house property where the loan is sanctioned between 1st April 2016 to 31st March 2017 | deduction of Rs. 50000 on the interest paid on loan taken |
| 8. | UNDER SECTION 80EEA Deduction available only to individuals towards interest payments made on loan taken for acquisition of residential house property for the first time where the loan is sanctioned between 1st April 2019 to 31st March 2022 & deduction should not have been claimed u/s 80EE | deduction upto Rs. 150000 on the interest paid on loan taken |
| 9. | UNDER SECTION 80G Deduction towards Donations made to prescribed Funds, Charitable Institutions, etc. Donation are eligible for deduction under the below categories | Note: No deduction shall be allowed under this section in respect of donation made in cash exceeding ₹ 2000/- |
| 10. | UNDER SECTION 80GGC Deduction towards Donations made to Political Party or Electoral Trust | Deduction towards Donations made to Political Party or Electoral Trust |
| 11. | UNDER SECTION 80TTA Deduction on interest received on saving bank accounts by Non-Senior Citizens | deduction limit Rs. 10000 |
| 12. | UNDER SECTION 80 TTB Deduction on interest received on deposits by Resident Senior Citizens | Deduction limit of Rs. 50000 |
If you are eligible for any of the above tax deductions then ,try to take benefit of these tax deductions as much as you can.
Saving tax for individuals with a salary above 10 lakhs requires careful planning and utilizing different tax deductions for which they are eligible. By understanding income tax slabs, deductions, and exemptions available under the Income Tax Act, you can optimize your tax savings while staying compliant with the law. Remember to consult with a tax professional or financial advisor to ensure you make informed decisions and maximize your tax benefits. for more do visit moneyinspires .