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In India, the Income Tax Department taxes an individual’s income based on the tax slab they belong to. Taxpayers are always looking for measures to pay zero tax on salary. But they miss out on salary optimisation. If you want to pay zero tax on a salary above 10 lakh, give this article a read. Here you will find various tips on tax planning for salary above 10 lakhs.
Let us first understand the tax regimes and how to choose between old and new tax regimes. These are the slab rates under the old income tax regime vs new income tax regime:
| Annual Income | Old Tax Regime | New Tax Regime |
| Up to Rs 2.5 lakhs | Nil | Nil |
| >2.5 lakhs – Rs 5 lakhs | 5% (however, full rebate) | 5% |
| >5 lakhs – Rs 7.5 lakhs | 20% + Rs. 12,500 | 10% + Rs.12,500 |
| >7.5 lakhs – Rs 10 lakhs | 20% + Rs. 12,500 | 15% + Rs.37,500 |
| >10 lakhs – Rs 12.5 lakhs | 30% + Rs 1,12,500 | 20% + Rs.75,000 |
| >12.5 lakhs – Rs 15 lakhs | 30% + Rs 1,12,500 | 25% + Rs.1,25,000 |
| >15 lakhs and above | 30% + Rs 1,12,500 | 30% + Rs.1,87,500 |
It is important to note that you will not receive any deduction under the new tax regime. Therefore, all the deductions discussed later in this article apply to only the old tax regime.
You may also use this old vs new tax regime calculator
Your salary component may include various tax-exempt allowances. The remaining salary will be your taxable income.
Therefore, we can maximise tax savings through exemptions and deductions.
You can find out your salary structure from the CTC, which generally looks like:
| Salary Component | Taxability |
| Basic | Fully-taxable |
| Dearness Allowance | Fully-taxable |
| House Rent Allowance (HRA) | Exempt up to a certain limit. Calculate now |
| Leave Travel Allowance (LTA) | Actual travel ticket expenses are exempt for 2 trips in 4 years under 10(5). Read more |
| Mobile/ Internet reimbursement | Exempt if: – used predominantly for office purposes – proofs/bills submitted |
| Children Education and Hostel allowance | Rs. 4800 per child (max 2 children) |
| Food | Rs. 50 per meal (max 2 meals a day)Annual= Rs. 31,200 (50*2*26 days*12 months) |
| Standard Deduction | Rs 50,000 (Will be given to all without any restrictions) |
| Professional Tax | Generally Rs 2,400 (Varies from state to state) |
When you are tax planning for salary above 10 lakhs, you can get deductions on the following:
| 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. |
Let us practically see a tax computation on how you can pay zero tax on a 10 lakh salary.
| Gross Salary | 10,00,000 |
| Less: | |
| HRA | (1,50,000) |
| LTA | (40,000) |
| Reimbursements | (24,000) |
| Children’s education and hostel allowance | (9,600) |
| Standard Deduction | (50,000) |
| Professional Tax | (2400) |
| Taxable Salary Income | 7,24,000 |
| Less: Deductions | |
| 80C (Refer note below) | (1,50,000) |
| 80D | (50,000) |
| 80E | (25,000) |
| Net Taxable Income | 4,99,000 |
| Tax on the above income | 12,450 |
| Rebate u/s 87A | (12,450) |
| Total Tax | 0 |
Additionally, you may claim these deductions if eligible:
| Interest on home loan deduction u/s 24b | (2,00,000) |
| Home loan 80EEA | (1,50,000) |
| Investments in National Pension Scheme (NPS) u/s 80CCD(1B) | ( 50,000) |
Note: You might not always have a home loan or be interested in the investment plans listed under Section 80C. However, you may consider these investments to make use of the entire Rs 1.5 lakh limit under 80C:
According to the new tax regime, if your annual income ranges from Rs.10.00 lakhs to Rs.12.50 lakh, the tax deduction rate will be Rs.75,000 + 20% above Rs.10,00,000.
Therefore the tax under the new regime shall be Rs. 95,000 plus cess.
These are some of the most common ways you can opt for while planning to save tax for salary above Rs 10 lakh. However, it is always recommended that you take the help of a tax professional to claim maximum deductions.
FAQs on How to Save Tax on 10 Lakhs Salary
You can claim deductions under Section 80C when you file your income tax returns at the end of each assessment year.
According to the Income Tax Act, an individual earning up to Rs.2,50,000 per year is tax-free.
However, for people aged 80 and above, Rs.5,00,000 is tax-exempt. Likewise, people aged 60 to 79 have a tax exemption limit of Rs.3,00,000.
No, according to Section 80C, Rs.1.5 lakh is the maximum deduction amount you can claim regardless of the number of investment policies. However, if you form a HUF, you can avail the 80C benefits of Rs.1.5 lakh for yourself individually and Rs. 1.5 lakhs for the HUF.
Yes, it is possible to save 100% on tax. However, it requires adequate tax planning and investments.
Yes, you can save taxes under Section 80C of the Income Tax Act by investing in post office schemes.
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