How To Save Tax For Salary Above 1 Crore?
For a salary income of Rs. 1 Crore, opting for the right tax regime is important to maximise tax savings. For a taxpayer having significant deductions and exemptions to claim, the old tax regime would be beneficial. However, opting for the new tax regime would be better where the taxpayer do not have much deductions and exemptions to claim.
To save tax on Rs. 1 Crore income, the old tax regime would be beneficial if the overall deductions & exemptions to claim exceed Rs. 8 lakhs.
Key Tax Saving Deductions Under New Tax Regime
- A standard deduction of Rs. 75,000 is available for salaried taxpayers.
- NPS contributions made by employer is allowed as deduction under Section 80CCD(2) up to 14% of basic salary.
- Section 24 allows deduction for home loan interest paid without any threshold limit for let-out property for the financial year.
- Exemptions within specified limits are available for gratuity and leave encashment settlements received.
- Maximum surcharge rate under the new tax regime is 25%, whereas it is 37% under the old tax regime.
Key Tax Saving Deductions Under Old Tax Regime
It is important to understand how the new taxable income will be calculated to find the tax liability on Rs. 1 Crore salary income.
- Salary (-) Exemptions = Taxable Salary Income
- Taxable Salary Income (-) Deductions = Net taxable income.
Tax savings can be maximised through the following exemptions and deductions.
Part 1 - Exemptions
| Salary Component | Taxability |
| Basic | Fully Taxable |
| Dearness Allowance | Fully Taxable |
| House Rent Allowance (HRA) | Exempt up to a certain limit. |
| Leave Travel Allowance (LTA) | Actual travel ticket expenses exempt for two2 trips in 4 years under 10(5). Read more |
| Mobile/ Internet reimbursement | Exempt if: |
| – used predominantly for office purposes – proofs/bills submitted | |
| Children's Education and hostel Allowance | Rs 4800 per child (max 2 children) |
| Food | Rs 50 per meal (max 2 meals a day)Annual= Rs. 26,400 (50*2*22 days*12 months) |
| Professional Tax | Generally Rs 2,400 (Varies from state to state) |
Part 2 - Deductions
The following deductions are available and can be utilised to ensure minimum tax liability under the old tax regime;
| Particulars | Limit |
| Standard Deduction | Rs. 50,000 available for all the salaried employees. |
| Paying health insurance policy premium (Section 80D) | Self, your spouse, and your dependent children: |
| Rs 25,000 (Rs 50,000 if aged 60 and above) | |
| Parents: Rs 25,000 (Rs 50,000 if aged 60 and above) | |
| Opting for an education loan (Section 80E) | Interest deduction for 8 years from the year of repayment of loan taken for the higher education of yourself, your spouse, dependent children, or a student of whom you are the legal guardian |
| Donating to charity (Section 80G) | 50% or 100% of the eligible amount |
| Investing in tax saving instruments (Section 80C) | Tax benefit of Rs.1,50,000 per year. You can invest in the |
| following options: | |
| – Employees’ Provident Fund (EPF) | |
| – Public Provident Fund (PPF) | |
| – Equity Linked Saving Scheme funds (ELSS) | |
| – Home loan repayment and Stamp duty | |
| – Sukanya Smriddhi Yojana (SSY) | |
| – National Savings Certificate (NSC) | |
| – Fixed Deposit for 5 years, and more | |
| Costs to treat disabled dependents (Section 80DD) | If you have disabled dependents for whom you bear |
| medical expenses, you are eligible for the tax relief: | |
| – 40% disability: Rs.75,000 | |
| – 80% disability: Rs.1,25,000 | |
| Deductions on home loan payments | Principal amount: Upto Rs 1.5 lakhs u/s 80C |
| Interest amount: Upto Rs 2 lakhs paid u/s 24b | |
| Maturity amount of a Life Insurance Policy | Maturity proceeds are tax exempt if the sum assured is ≤: |
| – 20%: policies issued before 1 April 2012 | |
| – 10%: policies issued after 1 April 2012 | |
| – 15%: policies issued after 1 April 2013 for a person with disability or disease. |
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)
| Particulars | Central / State Government Employer | Other Employer |
| Old Regime | 14% of salary (basic + DA) | 10% of salary (basic + DA) |
| New Regime | 14% of salary (basic + DA) | 14% of salary (basic + DA) |
Surcharge Under Old & New Tax Regime
Taxpayers having income exceeding Rs. 50 lakj pay an additional tax called as surcharge. The surcharge rates under the old and new tax regimes are as follows:
| Income Limit | New Tax Regime | Old Tax Regime |
| Up to Rs. 50 lakh | Nil | Nil |
| Rs. 50 lakh to Rs. 1 Crore | 10% | 10% |
| Rs. 1 Crore to Rs. 2 Crore | 15% | 15% |
| Rs. 2 Crore to Rs. 5 Crore | 25% | 25% |
| Above Rs. 5 Crore | 25% | 37% |
Old vs New Tax Regime Calculator
Use the below tax calculator to know which tax regime is better.
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
- HRA exemption = Rs 1,80,000
- LTA exemption = Rs. 55,000
- Children's Education and Hostel Allowance =Rs. 9,600
- Profession Tax = Rs. 2,400
- Investment in PPF, ELSS = Rs. 1,50,000
- Medical insurance premium towards Parents = Rs. 50,000
- Interest on education loan = Rs. 55,000
Tax Computation For FY 2025-26 under Old and New Tax Regime
| Particular | Old tax regime (FY 2025-26) | New Tax regime (FY 2025-26) |
| Gross Salary u/s 17(1) | 1,20,00,000 | 1,20,00,000 |
| Less: Exemption u/s 10 | ||
| HRA Exemption | 1,80,000 | NA |
| LTA Exemption | 55,000 | NA |
| Children's education and hostel allowance | 9,600 | NA |
| Less: Deduction u/s 16 | ||
| Standard deduction | 50,000 | 75,000 |
| Profession Tax | 2,400 | NA |
| Income under the Head Salary | 1,17,03,000 | 1,19,25,000 |
| Less: Deduction under Chapter VI-A | ||
| Section 80C | 1,50,000 | NA |
| Section 80D | 50,000 | NA |
| Section 80E | 50,000 | NA |
| Net Total Income | 1,14,53,000 | 1,19,25,000 |
| Income Tax (Including Surcharge) | 37,35,660 | 36,31,125 |
| Tax Liability (Including Cess) | 38,85,086 | 37,76,370 |
In this scenario, it will be beneficial for the taxpayer to opt for the new tax regime as it will result in a tax savings of Rs. 1,08,716.
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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About the Author
CA Mohammed S Chokhawala
I'm a chartered accountant, well-versed in the ins and outs of income tax, GST, and keeping the books balanced. Numbers are my thing, I can sift through financial statements and tax codes with the best of them. But there's another side to me – a side that thrives on words, not figures. Read more
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