How To Save Tax For Salary Above 30 Lakhs?

More and more high-income earners in India are looking for legal ways to reduce their tax burden. If you earn over ₹30 lakh annually, your effective tax rate can be steep especially under the new tax regime. But with the right strategy, you can significantly lower your tax liability by claiming various exemptions and deductions under the Income Tax Act, 1961.

This guide will help you understand how to save tax on salary above Rs. 30 lakhs with examples, latest income tax slabs, and tax-saving options available under both the old and new regimes.

Key Takeaways – Tax Saving Options for Rs.30 Lakh Salary

• Choose the new tax regime if you don’t have many deductions to claim. Stick with the old regime only if you have significant tax-saving deductions.
• Under the old regime, salaried employees could claim benefits like HRA, LTA, conveyance allowance, daily allowances, medical reimbursement, and deductions under Section 80C.
• Under the new regime, you get an increased standard deduction of Rs.75,000 (up from ₹50,000 earlier).
• If you have a let-out house property purchased or constructed on a loan, you can claim interest on the housing loan as a deduction.
• Invest in NPS to claim additional deductions under Sections 80CCD(1B) and 80CCD(2). Employer contributions are also eligible for deduction under this section.

Key Tax Deductions and Exemptions for a Salary of Rs. 30 Lakh

Regardless of the tax regime you choose, there are specific deductions and exemptions you can utilize to lower your taxable income. Let’s explore them:

Choose the Most Beneficial Regime 

• The decision between the old and new tax regimes should depend on the tax-saving investments you’ve made and your total income. If you have significant deductions like NPS, HRA, and Section 80C investments, the old regime may be more beneficial. However, if you don’t have many deductions, the new regime offers lower tax slabs, providing a better tax-saving opportunity.
• For high-income earners with a salary above Rs. 30 lakh, making the right choice of tax regime can lead to substantial savings.

House Rent Allowance (HRA)

House Rent Allowance (HRA) is one of the significant exemptions available for salaried employees. This allowance is provided by the company to cover the rent paid by employees. HRA is an exempt allowance under the Income Tax Act, and the exemption amount depends on certain rules. Claiming HRA can provide significant tax benefits for individuals earning a salary of Rs. 20 lakh. However, this allowance is not available under the new tax regime.

Standard Deduction 

The Standard Deduction is one of the most straightforward ways to reduce your taxable income. This deduction is available to both the general public and professionals without any specific conditions attached.

• Old Tax Regime: Rs. 50,000
• New Tax Regime: Rs. 75,000

By opting for this deduction, you can lower your taxable income, making it a popular choice for taxpayers earning above Rs. 30 lakh.

Employer’s Contribution to NPS u/s 80CCD(2)

• Section 80CCD(2) allows deduction for contributions made by employers in the National Pension Scheme (NPS). 
• Deduction is available under both new regimes for this amount, though the limit for deduction differs according to choice of regime. 
• This deduction helps reduce taxable income, especially for high earners, and provides additional retirement savings through NPS.

The following table describes the quantum of deduction available under both the regimes for contributions made by the employer in the NPS scheme under section 80CCD (2)

Deduction for Interest on Borrowing for Let-Out Property (Section 24)

• If the assessee has rented out his property (residential or commercial building), deduction under section 24 can be availed. 
• The amount of interest paid for the amount borrowed for purchase or construction of immovable property can be allowed as a deduction. 
• There is no maximum limit fixed for claiming this deduction. 

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. 
• If the amount received or the monetary value of the gift received in kind exceeds Rs.50,000, then the entire amount is taxable. 
• This tax saving option is available for both old and new tax regimes.

New Tax Regime - Income Tax Slab Rates For FY 2025-26 (AY 2026-27)

In the Budget 2025, a significant change in the tax slabs and rates was introduced. The slab limits were enhanced to blocks of 4 lakhs and a tax rate of 25% was also introduced. 

The revised tax slabs under the new regime for FY 2025-26 (AY 2026-27) are as follows:

New Tax Regime - Income Tax Slab Rates For FY 2024-2025 (AY 2025-26)

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 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. 

New tax regime is the default for FY 2024-25. Taxpayers have the option to revert to the old tax regime before filing their income tax returns by submitting Form 10-IEA. It needs to be submitted only If he has business income and this is not applicable if you are filing ITR 1 or 2. 

Furthermore, the rebate under section 87A is Rs 25,000, resulting in zero tax liability for salary income up to Rs 7 lakhs. But for income earned in FY 2025-26, the rebate limit has been increased to Rs. 60,000 meaning taxpayers with total income up to Rs. 12 lakhs will have zero tax liability. 

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

Income Tax Slabs Under Old vs New Income Tax Regime:

The tax slabs under the new vs old tax regime are:

To calculate your tax liability in both regimes, you can use old vs new tax regime calculator. 

Please note that you will not receive any deductions under the new regime. The tax benefits you will read in this article will only be applicable if you file under the old regime.  

Exemptions and Deductions Available for Salary

When you are tax planning for a salary above 30 lakhs, you need to know the following: 

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

Therefore, you can maximize tax savings through the following exemptions and deductions:

Part 1- Exemptions

You can find out your salary structure from the CTC. It generally looks like this:

Part 2- Deductions

When you are tax planning for a salary above 30 lakhs, you can get deductions on the following:

Example Of Calculation Of Tax Under New And Old Tax Regimes

Let’s take an example for better understanding: 

Example: Mr A has a Salary income of Rs. 30 lakhs. He is also claiming the following deduction and exemption. Calculate tax liability under the Old Tax Regime and New Tax Regime

1. HRA exemption = Rs 1,60,000
2. LTA exemption = Rs. 55,000
3. Children's Education and Hostel Allowance =Rs. 9,600
4. Profession Tax = Rs. 2,400
5. Investment in PPF, ELSS = Rs. 1,50,000
6. Medical insurance premium towards Parents = Rs. 50,000
7. Interest on education loan = Rs. 25,000

For FY 2025-26 the tax liability of Mr. A will be calculated as follows under the old and new tax regime:

For a Rs. 30 lakh income earned in FY 2025-26, opting for the new tax regime would be more beneficial for the taxpayer as it would result in a tax saving of Rs. 1,08,576

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

As per the above computation the Old Tax Regime is more beneficial by Rs. 5,824. This is because of the claim of deduction and exemption under the Old Tax Regime, which is not available in the New Tax Regime.

Note: In the case of the Old Tax Regime, 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)
• 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)
• Term plan insurance- Rs 12,000 premium (Around Rs 1 Crore cover)
• ULIP or endowment plant- Rs 12,000 premium.

Final Word

From the above examples we get to know that in general, the new tax regime is more beneficial with more relaxed tax slab rates. However, if the taxpayer has significant deductions and exemptions that can be claimed then the old tax regime would be more beneficial. Thus, it is important for the taxpayer to choose the appropriate tax regime to be able to save taxes.

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