High-income individuals, especially those who belong to the above 30 lakh tax slab, have to bear a heavy tax burden. However, there are various ways in which the tax liability can be reduced to some extent.
So, if you earn Rs 30 lakh yearly and are looking for ways how to save tax for salary above 30 lakhs, give this article a read. It covers all the ways in which you can save taxes by availing the deductions available under various sections of the IT Act.
The tax slabs under the new vs old tax regime are:
Annual Income | Old Tax Regime | New Tax Regime |
Up to Rs 2.5 lakhs | Nil | Nil |
>2.5 lakhs – Rs 5 lakhs | 5% (however full rebate) | 5% |
>5 lakhs – Rs 7.5 lakhs | 20% + Rs 12,500 | 10% + Rs 12,500 |
>7.5 lakhs – Rs 10 lakhs | 20% + Rs 12,500 | 15% + Rs 37,500 |
>10 lakhs – Rs 12.5 lakhs | 30% + Rs 1,12,500 | 20% + Rs 75,000 |
>12.5 lakhs – Rs 15 lakhs | 30% + Rs 1,12,500 | 25% + Rs 1,25,000 |
>15 lakhs and above | 30% + Rs 1,12,500 | 30% + Rs 1,87,500 |
Note: The tax slabs under new regime has been revised in Budget 2023
To calculate your tax liability in both the 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.
When you are tax planning for salary above 30 lakhs, you need to know the following:
Therefore, you can maximise 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:
Salary Component | Taxability |
Basic | Fully-taxable |
Dearness Allowance | Fully-taxable |
House Rent Allowance (HRA) | Exempt up to a certain limit. Calculate now |
Leave Travel Allowance (LTA) | Actual travel ticket expenses exempt for 2 trips in 4 years under 10(5). Read more |
Mobile/ Internet reimbursement | Exempt if: – used predominantly for office purposes – proofs/bills submitted |
Children Education and Hostel allowance | Rs 4800 per child (max 2 children) |
Food | Rs 50 per meal (max 2 meals a day)Annual= Rs 31,200 (50*2*26 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) |
Part 2- Deductions
When you are tax planning for salary above 30 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 |
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 – 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 |
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. |
Let’s take an example for better understanding:
Gross Salary | 30,00,000 |
Less: | |
HRA | (1,60,000) |
LTA | (55,000) |
Reimbursements | (35,000) |
Children education and hostel allowance | (11,000) |
Standard Deduction | (50,000) |
Professional Tax | (2400) |
Taxable Salary Income | 26,86,600 |
Less: Deductions | |
80C (Refer Note below) | (1,50,000) |
80D | (50,000) |
80E | (25,000) |
Net Taxable Income | 24,61,600 |
Tax on the above income | 5,50,980 |
Rebate u/s 87A | NA |
Total Tax | 5,50,980 + 4% cess |
Additionally, if you are eligible, you may claim these deductions:
Interest on home loan deduction u/s 24b | (2,00,000) |
Home loan 80EEA | (1,50,000) |
Investments in National Pension Scheme (NPS) u/s 80CCD(1B) | ( 50,000) |
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:
If you file your taxes according to the new regime, your tax liability will be:
For FY 2022-23: Rs 6,37,500 + 4% cess
For FY 2023-24: Rs 5,85,000 + 4% cess
Availing tax deductions are a great way to reduce your taxable income legally. However, there are various conditions that one needs to meet before being eligible to claim a deduction. So, before claiming tax benefits, make sure you are eligible for them.
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