The first step towards tax saving is to understand the country's tax structure. At present, there are two tax regimes operational in the country. The taxpayers now have the choice to pick a tax regime that can help them save more money. If you haven’t made any choice, you will be shifted to the new tax regime by default. 

If you want to know how to save tax on a 1 crore salary, this is just for you. 

Budget 2025 Update

The income earned up-to Rs.12 Lakhs under new regime will ultimately have Nil tax liability. Here's how!

The modified slab rates for new tax regime applicable for FY 2025-2026 are as follows:

Income Tax Slabs	Tax Rates
Up-to Rs. 4,00,000	NIL
Rs. 4,00,001 - Rs. 8,00,000	5%
Rs. 8,00,001 - Rs. 12,00,000	10%
Rs. 12,00,001 - Rs. 16,00,000	15%
Rs. 16,00,001 - Rs. 20,00,000	20%
Rs. 20,00,001 - Rs. 24,00,000	25%
Above Rs. 24,00,000	30%

• The rebate allowed under section 87A has now been increased to Rs.60,000 for new regime from Rs.25,000. Since the rebate allowed has been increased, tax incidence for income up-to Rs.12,00,000 will be zero. 
• Rebate is not allowed for income taxable at special rates. For example, capital gain u/s 112A.
• Marginal relief on rebate is still applicable.

Tax Slabs Under Old vs New Tax Regime

As per the new income tax guidelines, you can opt for either the new or the old regime while filing your taxes. Here is a difference between the two:

Note:

• Standard deduction allowed for salary is Rs.75,000 for FY 2024-25
• Deduction for family pension is one third of the pension amount or Rs.25,000 whichever is lower for FY 2024-25

If you file your taxes according to the new regime, you cannot avail most of the tax benefits. To calculate your tax liability using both regimes, you may use the old vs new tax regime calculator. 

Tax Saving Options - New Tax Regime

Here are the points to note under the New Tax Regime if you are a salaried individual having more than Rs 1 crore Salary: 

• Surcharge Rates if income exceeds Rs. 50 lakhs are as follows
  • Taxable income > 50,00,000 = Surcharge 10%
  • Taxable income > 1,00,00,000 = Surcharge 15%
  • Taxable income > 2,00,00,000 = Surcharge 25%
• Health and Education Cess of 4% is applicable on gross tax liability plus surcharge.
• Finance Act 2023 has capped the maximum surcharge limit under the New Tax Regime at 25%, whereas if taxable income exceeds Rs. 5 crores in old tax regime, the surcharge is levied at 37%.

Tax Exemption and Deductions Available under the New Tax Regime

• Transport allowances in case of a specially-abled person.
• Conveyance allowance received to meet the conveyance expenditure incurred as part of the employment.
• Any compensation received to meet the cost of travel on tour or transfer.
• Daily allowance received to meet the ordinary regular charges or expenditures you incur on account of absence from his regular place of duty.
• Perquisites for official purposes
• Exemption on voluntary retirement 10(10C), gratuity u/s 10(10) and Leave encashment u/s 10(10AA)
• Interest on Home Loan on the let-out property (Section 24)
• Gifts up to Rs 50,000
• Deduction for employer’s contribution to NPS account [Section 80CCD(2)]
• Deduction for additional employee cost (Section 80JJAA)
• Standard deduction of Rs 75,000 under the New Tax Regime applicable for FY 2024-25
• Deduction under Section 57(iia) of family pension income
• Amount paid or deposited in the Agniveer Corpus Fund under Section 80CCH(2).

Tax Saving Options - Old Tax Regime

If you fall above 1 crore tax slab, here is the tax slab under the old regime. Here are few Points to Note 

• Surcharge Rates if income exceeds Rs. 50 lakhs are as follows
  • Taxable income > 50,00,000 = Surcharge 10%
  • Taxable income > 1,00,00,000 = Surcharge 15%
  • Taxable income > 2,00,00,000 = Surcharge 25%
  • Taxable income > 5,00,00,000 = Surcharge 37%
• Once you find your gross payable tax liability, an additional 4% of Health and Education Cess shall also be applicable on gross tax liability plus surcharge.
• The above slab rates are applicable for Individual aged less than 60. For individuals aged between 60-80 basic exemption limit will be Rs. 3,00,000, and For individuals aged more than 80 basic exemption limit will be Rs. 5,00,000 

Tax Exemption And Deductions Available Under The Old Tax Regime

Deductions 

Exemptions:

There are several other deductions and exemptions as well. But this is just to give you a brief idea of the most commonly availed exemptions and deductions.

How to Save Taxes for an Income of Rs 1 Crore?

Irrespective of the regime you choose, you can consider the below points to derive maximum benefits of the deductions available under the Income Tax Act. 

Standard Deduction 

• Standard deduction is the favorite deduction among both general public and professionals.
• It is available against salary income without any conditions attached. 
• If you choose new tax regime, a standard deduction of Rs.75,000 is available. Rs.50,000 of standard deduction is available in case of old regime.

Choose the Most Beneficial Regime 

• Lets understand the tax implications related to slab rates. Lower the slab rates, higher will be tax liability. For example, when the income upto Rs. 2,50,000 is tax exempt in the old tax regime. Whereas, the income up to Rs.3,00,000 is exempt for new tax regime. 
• So we need to pay tax for amount exceeding Rs.2,50,000 under the old regime. Whereas in new regime, no tax liability arises as long as it does not exceed Rs.3,00,000. So, we can infer that higher the slab rates, more beneficial it is.  
• The old tax regime has a lot of tax deduction options with low slab rates. Whereas, the new tax regime has limited tax deduction options with higher slab rates.
• You can analyze and find the most beneficial regime for you, considering the tax deduction investments you have made and level of income. Choice of beneficial regime greatly reduces tax liability.

Employer’s Contribution to NPS u/s 80CCD(2)

• Section 80CCD(2) allows deduction for contribution made by employer in National Pension Scheme (NPS). 
• Deduction is available under both new regime for this amount, though the limit for deduction differs according to choice of regime. 

The following table describes the quantum of deduction available under both the regimes for contributions made by the employer in the NPS scheme under section 80CCD (2)

Gift Taxation

• Gifts received either in cash or through kind if the amount or the value of the gift received is up to Rs.50,000 is not taxable under section 56 of the Income Tax Act. 
• If the amount received or the monetary value of the gift received in kind exceeds Rs.50,000, then entire amount is taxable. 
• This tax saving option is available for both old and new tax regimes.

Deduction for Interest on Borrowing for Let Out Property

• If the assessee has rented out his property (residential or commercial building), deduction under section 24 can be availed. 
• The amount of interest paid for amount borrowed for purchase or construction of immovable property can be allowed as a deduction. 
• There is no maximum limit fixed for claiming this deduction. 

Gratuity and Leave Encashment

• Exemption is available for the amount received as gratuity and leave encashment at the end of the employment tenure. The employee may either retire or terminate the employment before retirement. 
• The Income Tax Act provides the maximum amount eligible for deduction for both gratuity and leave encashment. 
• This exemption is equally available for both old and new tax regimes.

Deduction on Additional Employee Cost

Deduction under section 80JJA is available irrespective of choice of regime of the assessee. 30% of the amount expended on additional employees can be allowed as a deduction.  

Deduction on Agniveer Corpus Fund

• Contribution made by the Central Government in Agniveer Corpus Fund of the assessee is allowed as a deduction under section 80CCH(2). 
• Individuals enrolled in the Agnipath Scheme for the armed forces are eligible to claim this deduction.
• There is no maximum limit for deduction under this section. The entire amount contributed by Central Government can be allowed as a deduction
• This deduction is also available under both old and new regimes.

Example Of Tax Calculation Under New And Old Tax Regime For The Salary Above 1 Crore

Let’s take an example for better understanding: 

Mr. A has a Salary income of Rs.1.2 Crores. He is also claiming the following deduction and exemption. Calculate tax liability under the Old Tax Regime and New Tax Regime

1. HRA exemption = Rs 1,80,000
2. LTA exemption = Rs. 55,000
3. Children's Education and Hostel Allowance =Rs. 9,600
4. Profession Tax = Rs. 2,400
5. Investment in PPF, ELSS = Rs. 1,50,000
6. Medical insurance premium towards Parents = Rs. 50,000
7. Interest on education loan = Rs. 55,000

In the above calculation, the tax under the Old Tax Regime is lower than the New Tax Regime. This is due to the deductions and exemptions claimed and allowed under the Old Tax Regime. Careful comparison according to the specific Individual must be made before opting for the appropriate Tax Regime.

Final Word

Now that you are aware of the two operational tax regimes, you can easily do your tax planning for a salary above Rs 1 crore. There are several schemes, especially under the old tax regime, that can help you substantially bring down your tax liability. On the other hand, the multiple slabs under the new regime can help you avail lower tax rates. Make sure to plan everything well in advance so that you do not miss out on tax savings. 

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