There are multiple tax-saving techniques that taxpayers can make use of in order to reduce their tax burdens. These methods come in handy for those individuals who have a high yearly income. 

If you belong to the above 50 lakh tax slab, you can opt to reduce the tax liability using any of the tax-saving options below. The guide below states how much tax will be deducted for 50 lakhs and various tax-saving methods you can use to reduce your yearly taxable income. 

Budget 2025 Update

The income earned up-to Rs.12 Lakhs under new regime will ultimately have Nil tax liability. Here's how!

The modified slab rates for new tax regime applicable for FY 2025-2026 are as follows:

• The rebate allowed under section 87A has now been increased to Rs.60,000 for new regime from Rs.25,000. Since the rebate allowed has been increased, tax incidence for income up-to Rs.12,00,000 will be zero. 
• Rebate is not allowed for income taxable at special rates. For example, capital gain u/s 112A.
• Marginal relief on rebate is still applicable. 
• The new Income Tax Bill has been tabled by the Honorable Finance Minister in the Lok Sabha. Learn more.
• It is to be noted that the old regime and new regime for FY 2024-25, both falls under the existing Income Tax Act. The bill, when passed, will become the new Income Tax Act, which is applicable from 01st April 2026.

Tax Slabs Under Old vs New Tax Regime

As per the new income tax guidelines, you can opt for either the new or the old regime while filing your taxes. Here is a difference between the two:

Note: 

• The overall surcharge rate is capped at 25% instead of 37% for individuals.
• The standard deduction for salary income of the old regime is Rs.50,000. For the new regime, it is Rs.75,000.

If you file your taxes according to the new regime, you cannot avail most of the tax benefits. To calculate your tax liability using both regimes, you may use the old vs new tax regime calculator. 

Tax Saving Options Under New Tax Regime

Individuals opting for the new tax regime have limited scope for claiming exemption or deduction. The main purpose of introducing a new regime is to reduce the deductions and exemptions available in the Income-tax Act. In exchange for such exemption and deduction, taxpayers are given a lower tax slab, giving them an incentive to switch to the new regime.

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

Salary

• 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 expenditure 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)
• Budget 2023 introduced a standard deduction of Rs 50,000 under New Tax Regime applicable from FY 2023-24. This has been increased to Rs.75,000 in Budget 2024 applicable from FY 2024-25 

House Property

• Interest on Home Loan on let-out property (Section 24)

Other Sources

• Gifts up to Rs 50,000
• Budget 2023 also introduced deduction under Section 57(iia) of family pension income. In Budget 2024 Limit of maximum Deduction under Family Pension has been increased from Rs. 15,000 to Rs. 25,000. 

Chapter VI A Deductions

• Deduction for employer’s contribution to NPS account [Section 80CCD(2)]
• Deduction for additional employee cost (Section 80JJA)
• Budget 2023 further introduced deduction of amount paid or deposited in the Agniveer Corpus Fund under Section 80CCH(2)
• The deduction on employers contribution to pension Scheme as per Section 80CCD (2) has been increased from 10% of salary to the 14% of salary in Budget 2024.

Here's a detailed list of exemptions and deductions available under the Old vs New Regime.

Tax Saving Options Under Old Tax Regime

You can conduct your tax planning by making use of certain exemptions and deductions that are allowed by the Income Tax Act. But you first need to understand your salary structure.  

Your salary component may include various tax-exempt allowances. The remaining salary will be your taxable income. 

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

Therefore, we can maximize tax savings through exemptions and deductions.

Part 1- Exemptions

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

Part 2- Deductions

When you are tax planning for salary above 10 lakhs, you can get deductions on the following:

These are some of the ways in which you can reduce your tax burden under the old tax regime. However, there are several terms and conditions that are associated with each tax-saving method. The tax deductions can be claimed while filing for Income Tax Returns. 

How to Save Taxes for an Income of Rs 20 Lakh?

Irrespective of the regime you choose, you can consider the below points to derive maximum benefits of the deductions available under the Income Tax Act. 

Standard Deduction 

• Standard deduction is the favorite deduction among both general public and professionals.
• It is available against salary income without any conditions attached. 
• If you choose new tax regime, a standard deduction of Rs.75,000 is available. Rs.50,000 of standard deduction is available in case of old regime.

Choose the Most Beneficial Regime 

• Lets understand the tax implications related to slab rates. Lower the slab rates, higher will be tax liability. For example, when the income upto Rs. 2,50,000 is tax exempt in the old tax regime. Whereas, the income up to Rs.3,00,000 is exempt for new tax regime. 
• So we need to pay tax for amount exceeding Rs.2,50,000 under the old regime. Whereas in new regime, no tax liability arises as long as it does not exceed Rs.3,00,000. So, we can infer that higher the slab rates, more beneficial it is.  
• The old tax regime has a lot of tax deduction options with low slab rates. Whereas, the new tax regime has limited tax deduction options with higher slab rates.
• You can analyze and find the most beneficial regime for you, considering the tax deduction investments you have made and level of income. Choice of beneficial regime greatly reduces tax liability.

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

• Section 80CCD(2) allows deduction for contribution made by employer in National Pension Scheme (NPS). 
• Deduction is available under both new regime for this amount, though the limit for deduction differs according to choice of regime. 

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)

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

Deduction for Interest on Borrowing for Let Out Property

• 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 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 Additional Employee Cost

Deduction under section 80JJA is available irrespective of choice of regime of the assessee. 30% of the amount expended on additional employees can be allowed as a deduction.  

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.

Calculate Income Tax on a Salary Above 50 Lakhs? Tax Calculation Example

In the above discussion, we understood the tax deductions and exemptions available under the old and new tax regimes. Considering all the tax-saving investments, let us calculate the income tax under each regime and compare the tax liability using the example below. 

Example: Mr A has a Salary income of Rs. 50 lakhs. He can claim an HRA exemption of Rs. 3.5 lakhs, LTA exemption of Rs. 60,000, Children's education and hostel allowance of Rs. 9,600. Profession Tax of Rs. 2,400. He has also invested Rs. 1.5 lakhs in PPF, paid a medical insurance premium of Rs. 50,000 towards senior citizen parents. He paid Rs. 25,000 towards his child’s interest on an education loan.

Moreover, eligible individuals can also claim these deductions:

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)
• ULIP or endowment plant- 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)
• Term plan insurance- Rs 12,000 premium (Around Rs 1 Crore cover)

In the above example, the tax liability paid under the old tax regime is lesser than the new tax regime. Hence in the given example, the taxpayer has to choose the old tax regime to avail minimum tax liability. 

In conclusion, if you are a taxpayer with income more than 50 lakhs investing in tax-saving options will be beneficial while paying tax to the government. However, a comparative analysis is required based on a specific Individual. This can be done using our Income Tax calculator.

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