How To Save Tax For Salary Above 15 Lakhs?

If you're earning above Rs 15 lakh annually, you’re likely looking for ways to minimize your tax liability. With strategic tax planning, you can significantly reduce your tax obligations. The Income Tax Act provides a variety of deductions and exemptions, available under both the old and new tax regimes, that can help you save on taxes. From employer contributions to the National Pension Scheme (NPS) to deductions on home loan interest, there are several effective tax-saving measures to explore. By understanding and leveraging these options, you can optimize your finances and maximize your tax savings.

Key Takeaways

• Choose new tax regime unless you have a lot of tax saving deductions under the old regime.
• You can claim an enhanced standard deduction of Rs.75,000, if you choose new regime.
• Opt for NPS contribution in your company HR, thereby you can claim employer's contribution up to 14% of basic pay under the new regime.
• If you have let out house property purchased out of loan, you can claim deduction on interest amount.
• If you can claim HRA, LTA, interest on home loan, 80C deductions, more than Rs.4,08,500, you can choose old regime.

How to Save Taxes for an Income of Rs 15 Lakh?

If you're earning Rs 15 lakh annually, tax planning is essential to minimize your tax liability. Here are some key tax-saving strategies available under both the old and new regimes:

Choose the Right Tax Regime

Choosing between the old and new tax regimes is crucial for maximizing your savings. The new tax regime offers lower tax rates but fewer deductions, while the old regime offers various exemptions and deductions that can help you reduce taxable income. Consider your financial situation carefully to choose the best option.

House Rent Allowance (HRA)

A taxpayer can claim an exemption on House Rent Allowance (HRA) if they are paying rent for accommodation in the place of employment. The exempt amount of HRA is calculated based on the rules specified under the Income Tax Act. Claiming HRA exemption can significantly reduce your tax liability. However, it is important to note that HRA can only be claimed under the old tax regime. It is not available under the new tax regime.

Standard Deduction

Salaried employees are eligible for a standard deduction of Rs. 50,000 under the old tax regime and Rs. 75,000 under the new tax regime. This is a mandatory deduction available to all salaried employees, without any conditions, and it helps in reducing your tax liability.

Deduction for Interest on Borrowing for Let-Out Property

If the taxpayer has rented out a property (either residential or commercial), they can avail of a deduction under Section 24 of the Income Tax Act. This deduction applies to the interest paid on loans borrowed for the purchase or construction of the property. There is no maximum limit for claiming this deduction for let-out property.

However, for self-occupied property, the interest deduction is limited to Rs. 2 lakh.

It's important to note that under the old tax regime, taxpayers can claim this deduction for both self-occupied and let-out properties. In contrast, under the new tax regime, this deduction is available only for let-out properties.

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:

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 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.

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. 
• This tax saving option is available for both old and new tax regimes.

Deductions & Exemptions Under the New Tax Regime

Following deductions are available under the new tax regime if you have a salary of more than 15 lakhs;

• Standard deduction up to Rs 75,000 (For Salaried employees).
• Section 80CCD(2) - Employer contribution to NPS.
• Section 80 CCH - Investment made in Agniveer Corpus.
• Section 57(iia) - Family Pension received.
• 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).
• 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. 

The New Slab Rates Applicable for Financial Year 2025-2026

The slab rates for new tax regime applicable for FY 2025-2026 and the maximum income tax payable under each slab are as follows:

Slab Rates Applicable for Financial Year 2024-2025

As per the latest Finance Act 2024, changes have been made in the slab rate for the new tax regime applicable for FY 2024-25 and the maximum income tax payable as follows - 

In the new tax regime, the standard deduction has been increased from Rs. 50,000 to Rs. 75,000, and the deduction on family pension has also been increased from Rs. 15,000 to Rs. 25,000.

Slab Rates Applicable for Old Tax Regime

The slab rates for old regime for FY 2024-25 and FY 2025-26 are as follows

• Individuals less than 60 Years of Age

• Resident Individuals Aged 60-80 Years

• Resident Individuals Aged more than 80 Years

Tax Slabs Under Old vs New Regime

The old regime allows for several deductions that are not available in the new one. However, the tax rates under the new regime are lower than that of the old tax regime. 

You can also use the old vs new tax regime calculator for better understanding. 

Above tax slabs under the old tax regime are applicable to those individuals aged less than 60 years. For individuals aged between 60 and 80 years basic exemption is Rs 3,00,000 and for individuals aged over 80 years, the basic exemption is Rs 5,00,000. The tax slab under the new tax regime is the same for all individuals.

Deductions Available for Salary Above 15 lakhs

Your salary structure contains several components that are exempted from taxation. The net taxable income is calculated on your salary in the following ways:

Deductions & Exemptions Under Old Tax Regime

So, if you belong to the above 15 lakh tax slab, you can avail of tax deductions from the following.

1. Exemptions

You can find out your salary structure from the CTC, which generally looks like:

2. Deductions

You can get deductions on the following when you are tax planning for salary above 15 lakhs:

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:  

• ELSS mutual funds- Rs 60,000 (Investment: Rs 500 per month SIP, Returns- 12% CAGR, Lock-in-period: 3 years)
• Term plan insurance- Rs 12,000 premium (Around Rs 1 Crore cover)
• ULIP or endowment plan - Rs 12,000 premium
• Children’s Education fees: (Rs 25,000 to Rs 1 lakh) 
• EPF: Around Rs 30,000 – Rs 72,000, i.e., 12% of your basic + DA (contribution already made by your employer)

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:

The manner of calculation of tax is described below:

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.

For FY 2024-25 the tax liability of Mr. A will be calculated as follows under the old and new tax regime:

Now, according to the new tax regime, your payable tax amount will be Rs 1,30,000 which is more beneficial in comparison to the old regime. In the above scenario, the tax liability to be paid by the taxpayer, including cess, differs as per the deductions and exemptions allowed under both regimes. Choosing the tax regime by an individual should be done keeping in mind the investments made and the deductions that can be claimed for the same. 

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