Filing for AY 2024-25 is coming soon
Filing for AY 2024-25 is coming soon
Keep calm and sign up for early access to our super filing platform
Index

How To Save Tax For Salary Above 10 Lakhs?

By Ektha Surana

|

Updated on: Apr 5th, 2024

|

35 min read

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 a salary above 10 lakhs.

Latest Update 

As per the Finance Act 2023, Tax Slabs under the New Tax Regime have been updated. Accordingly now the basic exemption limit is Rs. 3,00,000. Also Rebate under Section 87A is made applicable on Income up to Rs 7,00,000. Thus, if you opt for the New Tax Regime, those Individuals having Income less than Rs. 7,00,000 will have to pay Zero Tax Liability.

Income Tax Slabs Under Old vs New Tax Regime:

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  tax regime vs the 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, with the new tax regime being your default tax regime from FY 2023-24 onwards. Here is a difference between the two:

Tax Slab

FY 2023-24 Tax Rate (Old tax regime)

Tax Slab

FY 2023-24 Tax Rate (New tax regime)

Up to Rs 2,50,000

Nil

Up to Rs 3,00,000

Nil

Rs 2,50,000 – Rs 5,00,000

5%

Rs 3,00,000 – Rs 6,00,000

5%

Rs 5,00,000 – Rs 10,00,000

20%

Rs 6,00,000 – Rs 9,00,000

10%

Rs 10,00,000 and beyond

30%

Rs 9,00,000 – Rs 12,00,000

15%

NA

NA

Rs 12,00,000 – Rs 15,00,000

20%

NA

NA

Rs 15,00,000 and beyond

30%

Budget 2024 update: There is no change in tax slabs as per Budget 2024.

Ways To Save Tax On 10 lakhs Salary

Understanding of your Salary structure, available exemptions, and deductions is necessary to save tax on your salary income.

Understanding Salary Structure:

Your salary component may include various tax-exempt allowances. The remaining salary will be your taxable income. 

Particular

Amount 

Gross Salary u/s 17(1)

XXXX

Less: Exemption u/s 10

 

HRA Exemption

XXXX

LTA Exemption

XXXX

Reimbursement

XXXX

Children's education and hostel allowance

XXXX

Less: Deduction u/s 16

 

Standard deduction

XXXX

Income under the Head Salary

XXXX

Less: Deduction under Chapter VI-A

 

Section 80C

XXXX

Net Total Income

XXXX

Therefore, we can maximise tax savings through exemptions and deductions. It is important to note that most of the deductions are only available in the old tax regime.

Exemptions and Deductions Under New Tax Regime

Unlike the Old tax regime, the New tax regime has minimal scope for claiming deductions or exemptions. Deductions that are available in the New tax regime are as follows.

  1. Standard deduction of Rs 50,000. This can be claimed only for individuals having income from salary.
  2. Section 80CCD(2) - Employer Contribution to NPS 
  3. Section 80CCH - Investment made in Agniveer Corpus
  4. Section 57(iia) - Family Pension received.
  5. Exemption on voluntary retirement 10(10C), gratuity u/s 10(10) and Leave encashment u/s 10(10AA) 
  6. Interest on Home Loan on the let-out property (Section 24)
  7. Transport allowances in case of a specially-abled person. 
  8. Conveyance allowance received to meet the conveyance expenditure incurred as part of the employment. 
  9. Any compensation received to meet the cost of travel on tour or transfer.

Exemptions and Deductions Under Old Tax Regime

Part 1- Exemptions

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 two 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

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 for notified institutions.

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% or severe 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 under secton 24b  

The 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.

– Exemption is applicable in case of ULIP only if the annual premium does not exceed Rs 2,50,000 (From 1st April 2021)

– Exemption is applicable in case of Life insurance other than ULIP only if the annual premium does not exceed Rs. 5,00,000 (From 1st April 2023 onwards)

Standard Deduction

Rs 50,000 (Will be given to all without any restrictions)

How to Pay Zero Tax on a 10 Lakh Salary? 

Let us practically see a tax computation on how you can pay zero tax on a 10 lakh salary under both regimes:

Example on Calculation of Tax under New and Old Tax Regime

Mr A has a salary income of Rs. 10 lakhs. He is eligible to claim an HRA exemption of Rs. 1.5 lakhs, LTA of Rs 40,000, Children's education allowance of Rs 9,600, and Profession tax of Rs 2,400. He has also invested in PPF of Rs. 1.5 lakhs eligible for deduction under section 80C, Medical insurance premium of Rs. 50,000 and paid interest on education loan of Rs. 55,000. Tax calculation will be as follows

Particular

Old Tax Regime

New Tax Regime

Gross Salary

10,00,000

10,00,000

Less:

 

 

HRA

(1,50,000)

LTA

(40,000)

Children’s education and hostel allowance

(9,600)

Standard Deduction

(50,000)

(50,000)

Professional Tax

(2400)

Taxable Salary Income

7,48,000

9,50,000

Less: Deductions

 

 

80C (Refer to note below)**

(1,50,000)

80D

(50,000)

80E

(55,000)

Net Taxable Income

4,93,000

9,50,000

Tax on the above income 

12,150

54,600

Rebate u/s 87A ( under the old regime rebate amounts to Rs. 12,500)

(12,150)

Total Tax on Rs 10 lakh under the old regime (inclusive of cess)

0

54,600

Additionally, you may claim these deductions under the Old Tax Regime 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 only sometimes 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: 

  • EPF: Around Rs 30,000 – Rs 72.000, i.e., 12% of your basic + DA (contribution already made by your employer)
  • Term plan insurance: Rs 12,000 premium (Around Rs 1 Crore cover)
  • ULIP or endowment plant: Rs 12,000 premium
  • ELSS mutual funds: Rs 60,000 (Investment: Rs 500 per month SIP, Returns- 12% CAGR, Lock-in-period: 3 years)
  • Children’s Education fees: (Rs 25,000 to Rs 1 lakh) 

In the above 2 scenarios, you will observe that zero tax liability arises after claiming deduction and exemption in the old tax regime. But in the new tax regime, there is a tax liability of Rs. 54,600. 

Thus it is very important that you check based on your available salary, exemption and deduction which tax regime is more beneficial for you. You may use this old vs new tax regime calculator.

Related Articles:

How To Save Tax For Salary Above 7 Lakhs?

How To Save Tax For Salary Above 12 Lakhs?

How To Save Tax For Salary Above 15 lakhs?

How To Save Tax For Salary Above 20 Lakhs?

How To Save Tax For Salary Above 30 Lakhs?

How To Save Tax For Salary Above 50 Lakhs?

How to Save Tax For Salary Above 1 crore?

Frequently Asked Questions

How to claim deductions under Section 80C?

You can claim deductions under Section 80C when you file your income tax returns at the end of each assessment year. 

How much income is tax-free according to the Income Tax Act?

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. 

However under the new tax regime the basic exemption limit for every taxpayer despite the age limit is Rs 3,00,000.

Can one claim Rs.1.5 lakh deduction for more than one investment policy?

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. 

Can you save 100% tax?

Yes, it is possible to save 100% on tax. However, it requires adequate tax planning and investments.

Can one avail of tax deductions by investing in post office schemes?

Yes, you can save taxes under Section 80C of the Income Tax Act by investing in post office schemes

About the Author

Multitasking between pouring myself coffees and poring over the ever-changing tax laws. Here, I've authored 100+ blogs on income tax and simplified complex income tax topics like the intimidating crypto tax rules, old vs new tax regime debate, changes in debt funds taxation, budget analysis and more. Some combinations I like- tax and content, finance & startups, technology & psychology, fitness & neuroscience. Read more

summary-logo

Quick Summary

In India, Income Tax Department taxes based on tax slabs. Taxpayers overlook salary optimization. New Finance Act 2023 updates tax slabs. Tax planning tips for salaries over 10 lakhs are discussed. Ways to save tax on this salary. Comparisons between old and new tax regimes. Various deductions and exemptions available under both regimes.

Was this summary helpful?
liked-feedbackliked-feedback

Clear offers taxation & financial solutions to individuals, businesses, organizations & chartered accountants in India. Clear serves 1.5+ Million happy customers, 20000+ CAs & tax experts & 10000+ businesses across India.

Efiling Income Tax Returns(ITR) is made easy with Clear platform. Just upload your form 16, claim your deductions and get your acknowledgment number online. You can efile income tax return on your income from salary, house property, capital gains, business & profession and income from other sources. Further you can also file TDS returns, generate Form-16, use our Tax Calculator software, claim HRA, check refund status and generate rent receipts for Income Tax Filing.

CAs, experts and businesses can get GST ready with Clear GST software & certification course. Our GST Software helps CAs, tax experts & business to manage returns & invoices in an easy manner. Our Goods & Services Tax course includes tutorial videos, guides and expert assistance to help you in mastering Goods and Services Tax. Clear can also help you in getting your business registered for Goods & Services Tax Law.

Save taxes with Clear by investing in tax saving mutual funds (ELSS) online. Our experts suggest the best funds and you can get high returns by investing directly or through SIP. Download Black by ClearTax App to file returns from your mobile phone.

Cleartax is a product by Defmacro Software Pvt. Ltd.

Company PolicyTerms of use

ISO

ISO 27001

Data Center

SSL

SSL Certified Site

128-bit encryption