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How To Save Tax For Salary Above 20 Lakhs?

By Ektha Surana


Updated on: Apr 1st, 2024


28 min read

The Income Tax Department follows a progressive tax regime that increases the tax rate with the rise in an individual’s income. As a result, people belonging to high-income groups generally bear a higher taxation rate and those belonging to the low or middle-income group have to bear a lesser tax rate.

Individuals with a high yearly income generally look for tax-saving measures to reduce their tax burdens. If you are looking for how to save tax on 20 lakhs salary, check out all the tax-saving options you need to know.  

Latest Update On New Tax Regime

In the budget 2023, changes have been made to the tax slab rates, and the new tax regime has been made the default regime for FY 2023-24. However, taxpayers can opt out of the new tax regime before filling their income tax returns by submitting Form 10-IEA. 

Keeping this in mind, let us discuss the tax slab rates, deductions, and exemptions available with examples under both regimes.

Tax Saving Options Above 20 Lakhs Salary - New Tax Regime 

Tax Slabs for individuals in the new regime (Revised as per Budget 2023) are as follows;

Tax Slab

FY 2023-24 Tax Rate (New tax regime)

Up to Rs 3,00,000


Rs 3,00,000 – Rs 6,00,000


Rs 6,00,000 – Rs 9,00,000


Rs 9,00,000 – Rs 12,00,000


Rs 12,00,000 – Rs 15,00,000


Rs 15,00,000 and beyond


Individuals opting for the new tax regime have limited scope of claiming exemption or deduction. The main purpose of introducing a new regime is to phase out all the deductions and exemptions available in the Income-tax Act. Compensating such limited exemptions and deductions, taxpayers are provided with a lower tax slab providing them an incentive to switch over to the new regime.

However, even in the new regime, taxpayers can still claim certain exemptions or deductions as follows

  • 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.
  • Daily allowance received to meet the ordinary regular charges or expenditures you incur on account of absence from his regular place of duty.
  • Perquisites for official purposes
  • 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)
  • Deduction for employer’s contribution to NPS account [Section 80CCD(2)].
  • Deduction for additional employee cost (Section 80JJAA)
  • Standard deduction of Rs 50,000 under the New Tax Regime applicable from FY 2023-24
  • Deduction under Section 57(iia) of family pension income
  • Amount paid or deposited in the Agniveer Corpus Fund under Section 80CCH(2)

Tax Saving Options Above 20 Lakhs Salary - Old Tax Regime 

Tax Slab under the old regime are as follows;

Tax Slab

FY 2023-24 Tax Rate (Old tax regime)

Rs. 0 - Rs 2,50,000


Rs 2,50,000 – Rs 5,00,000


Rs 5,00,000 – Rs 10,00,000


Rs 10,00,000 and beyond


Note:  Above slab rates are applicable for individuals aged less than 60 years. The basic exemption limit for individuals over 60 years is Rs 300,000, and for individuals aged more than 80 years is Rs 500,000.

There are many components in your salary that are exempted from taxes. Furthermore, you are liable for several deductions if you opt for the old tax regime. Thus, your net taxable income will be as follows:

  • Salary (-) Exemptions = Taxable Salary Income
  • Taxable Salary Income (-) Deductions = Net taxable income.

Take a look at them below:

Salary Components


Basic Pay


Dearness Allowance (DA)


House Rent Allowance (HRA)

Exemption up to a certain limit. 

Calculate now

Leave Travel Allowance (LTA)

Actual travel ticket expenses 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 Expenses

Rs 50 per meal (max 2 meals a day)Annual= 

Rs 26,400 (50*2*22 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)

Moreover, when you are tax planning for a salary above 20 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


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% 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 u/s 24b  

Maturity amount of a Life Insurance 


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.

These are some of the ways in which individuals who earn a salary above Rs 20 lakhs per annum can save on income tax. However, make sure to accurately calculate your tax liability and applicable deductions.

Tax Calculation Under New and Old Regime:  

Let us understand the tax calculations on salary above 20 lakh based on the example given below.

Example: Mr. A has a salary income of Rs 20 lakhs claiming deductions like HRA of Rs. 1,00,000, LTA of Rs. 20,000, Children's education allowance for two children of Rs. 9,600, Professional tax of Rs 2,400. He has also claimed deductions like 80C of Rs. 150,000, 80D - Medical insurance premium of Rs. 25,000, and NPS contribution of Rs 50,000. Which is the best tax regime to opt for in this case 


Old tax regime

New tax regime

Gross Salary u/s 17(1)



Less: Exemption u/s 10


HRA Exemption


LTA Exemption


Children's education and hostel allowance (for two children)


Less: Deduction u/s 16


Standard deduction



Professional Tax


Income under the Head Salary



Less : Deduction under Chapter VI-A


Section 80C


Section 80CCD(1B)


Section 80D


Net Total Income



Tax Liability (Including 4% Cess)



Conclusion: In the above calculation, you will observe that the new tax regime is more beneficial in spite of claiming deductions in the old regime.

Final Word

In the above calculation, you will observe that based on the investments made by the taxpayer, the tax liability differs in both regimes. Hence if you have more investments made as stated above, then it is efficient to choose the old tax regime however, if you do not have many investments made, then choosing the new tax regime would be a more efficient way to save taxes as they provide concessional tax slab rates.

Related Articles:
How to Save Tax for Salary Above 7 Lakhs?
How To Save Tax For Salary Above 10 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 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 decide which tax regime I should opt for?

Comparative analysis of your salary and current exemption using a tax calculator will help you understand which regime is better. You can choose to claim or forgo the exemption based on which regime is beneficial to you. 

Which is the best tax saving scheme applicable both for the new and old tax regime?

Employer contribution to NPS u/s 80CCD(2) is eligible for deduction both under new tax regime and old tax regime. Thus if you have decided to go with new tax regime , asking your employer to invest in NPS will help you not only to reduce the tax liability further but also create your retirement corpus.

Which tax regime is better for 20 lakhs?

This requires comparative analysis which is based on your Salary income , Exemption and deduction applicable for your. You can use our tax calculator and check which is the best option.

What is an in-hand salary for 20 LPA?

Your in hand salary for Rs 20 lakhs will depend upon the CTC , PF contribution , PT deduction , TDS deduction. You can use our in hand calculator to compute the same

Can you pay zero tax on a 20 lakhs salary?

Payment of tax depends on the exemption and deduction that you claim. However, the possibility of paying zero taxes is very remote even when you claim all deductions and exemptions, as explained above.

How to reduce tax on 20 lakhs salary?

Reduction of tax is possible using various exemptions and deductions available in Income tax.

  1. HRA Exemption u/s 10(13A)
  2. Standard deduction 
  3. Section 80C - PPF, LIC, ELSS etc.
  4. Section 80D - Medical insurance premium

 Allowability of such deduction depends on the tax regime that you choose. You can use our Income tax calculator to check which is the best tax regime applicable to  you.

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


Quick Summary

The Income Tax Department follows a progressive tax regime for different income groups where high-income individuals face higher tax rates. Tax-saving options are available for taxpayers with over 20 lakhs salary under both the old and new tax regimes. The new regime offers lower tax rates but limited exemptions. Taxpayers can still claim some deductions such as medical insurance premiums and home loan interest. Choosing between the old and new regimes depends on individual investments.

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