How To Save Tax For Salary Above 30 Lakhs?

For a salary level of Rs 30 lakhs, the most important part of the tax-saving strategy is the choice of the most beneficial regime. The new tax regime provides relaxed slab rates and limited deductions whereas the old tax regime has a variety of tax deductions with less beneficial slab rates.

When you have deductions under the old regime more than Rs 8 lakhs, then the old regime is the most beneficial. Else, it is better to choose the new regime.

Key Tax Deductions under the New Regime

• Standard Deduction of Rs. 75,000 is available under the new regime.
• Section 80CCD(2) allows deduction for contributions made by employers in the National Pension Scheme (NPS). Up to 14% of the basic pay can be claimed as a deduction under the new regime.
• Under section 24, home loan interest due during the financial year for the let out property - can be claimed as a deduction. Entire interest can be claimed as a deduction without any theshold limit.
• Retirement settlements like gratuity and leave encashment. is eligible for exemption under the new regime, subject to limits prescribed.

Key Tax Deductions under the Old Regime

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:

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)

Old v/s New Tax Regime Calculator

Use the below calculator to understand the tax implications under both old and new regime for your salary level.

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. As mentioned earlier, if the tax saving deductions are more than Rs. 8 lakhs, the old regime would have been more beneficial, since the tax deductions surpass the concessional slab rates under the new 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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