How To Save Tax For Salary Above 15 Lakhs?
For a salary range of Rs 15 lakhs, the most important part of the tax strategy is to determine the most beneficial regime. The new tax regime offers limited deductions with relaxed slab rates, whereas the old regime offers a pleathora of deductions with tighter slab rates.
The old tax regime becomes more beneficial only if the taxpayer claims deductions exceeding Rs. 5,43,750.
Key Deductions under the New Tax Regime
- Standard Deduction: Rs. 75,000 of flat standard deduction is available against salary income under the new regime.
- Section 80CCD(2): Employer's contribution to NPS can be claimed as a deduction, up to 14% of the basic pay of the employee.
- Section 24: Entire interest paid on home loan of a let out property can be claimed as a deduction, without any threshold limit.
- Retirement Benefits: Gratuity, leave encashment, and other retirement benefits are eligible for exemption under the new regime, subject to ceiling limits.
Key Deductions under the Old Tax Regime
Under the old tax regime, there are various exemptions and deductions available, and they are described below.
1. Exemptions
You can structue your CTC in such a manner that you can optimize your tax outlflow under the old regime.
| 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 are exempt for two trips in 4 years under 10(5). |
| Mobile/ Internet reimbursement | Exempt if: – used predominantly for office purposes – proofs/bills submitted |
| Children's Education and Hostel Allowance | Rs 1200 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) |
2. Deductions
The following are the tax saving deductions under the old regime.
| Particulars | Limit |
| Standard Deduction | Rs 50,000 flat standard deduction can be claimed under the old regime. |
| Paying health insurance policy premium (Section 80D) | Self, your spouse, and your dependent children: Rs 25,000 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 – Severe or 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 |
| 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. |
5. Employer’s Contribution to NPS u/s 80CCD(2)
Under Section 80CCD(2), employer contributions to the National Pension Scheme (NPS) are deductible. Here's how the deduction applies in both regimes:
| 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) |
Old v/s New Regime Tax Calculator
You can ascertain the potential tax outflow under the old and new regime through the tax calculator tool provided below:
Calculating Tax Under Old and New Tax Regimes
Ms Maya has a salary income of Rs. 15 lakhs. She can claim an HRA exemption of Rs. 1 lakh, an LTA exemption of Rs. 20,000 and a Children's education and hostel allowance of Rs. 9,600. Profession tax of Rs 2,400 was deducted from her payslip. She has invested Rs. 1.5 lakhs in PPF and made a voluntary contribution to NPS of Rs 50,000. She has paid a medical insurance premium of Rs. 25,000 for her own family. Tax calculation under the new and old tax regime will be as follows.
For FY 2025-26 the tax liability of Mr. A will be calculated as follows under the old and new tax regime:
| Particular | Old tax regime (FY 2025-26) | New tax regime (FY 2025-26) |
| Gross Salary u/s 17(1) | 15,00,000 | 15,00,000 |
| Less: Exemption u/s 10 | ||
| HRA Exemption | 1,00,000 | NA |
| LTA Exemption | 20,000 | NA |
| Children's education and hostel allowance (for 2 children) | 9,600 | NA |
| Less: Deduction u/s 16 | ||
| Standard deduction | 50,000 | 75,000 |
| Profession Tax | 2,400 | NA |
| Income under the Head Salary | 13,18,000 | 14,25,000 |
| Less: Deduction under Chapter VI-A | ||
| Section 80C - PPF/LIC/ELSS | 1,50,000 | NA |
| Section 80CCD(1B) - NPS | 50,000 | NA |
| Section 80D - Medical insurance | 25,000 | NA |
| Net Total Income | 10,93,000 | 14,25,000 |
| Tax Liability (Including cess) | 1,46,016 | 97,500 |
The manner of calculation of tax is described below:
| Old Regime | New Regime | ||
| Particulars | Amount | Particulars | Amount |
| Net Total Income | 10,93,000 | Net Total Income | 14,25,000 |
| Up to Rs. 2.5 lakh | 0 | Rs. 4 lakhs - Rs. 8 lakhs taxed at 5% | 20,000 |
| Rs. 2.5 lakh - Rs. 5 lakh | 12500 | Rs. 8 lakhs - Rs. 12 lakhs taxed at 10% | 40,000 |
| Rs. 5 lakh - Rs. 10 lakh | 100000 | Rs. 12 lakhs - Rs. 14.25 lakhs taxed at 15% | 33,750 |
| Rs. 10 lakh - Rs. 10.93 lakh | 27900 | ||
| Tax calculated under slab rates | 140400 | Tax calculated under slab rates | 93,750 |
| Health and Education Cess at 4% | 5,616 | Health and Education Cess at 4% | 3,750 |
| Total Tax Payable | 1,46,016 | Total Tax Payable | 97,500 |
By opting to pay tax under the old tax regime, for FY 2025-26 the taxpayer will be able to save Rs. 48,516 in taxes. If the taxpayer has had deductions under the old regime of more than Rs. 5,43,750, the old regime would have been more beneficial, because the tax savings due to deductions would have surpassed the tax savings due to relaxed slab rates under the new regime.
Final Word
The choice of the most beneficial regime is the most important and foremost step in tax planning. It is recommended to analyse the financial goals, consider the available and required investment deductions, and then structure your CTC so as to derive the most advantage of the beneficial tax regime for you.
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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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