How To Save Tax For Salary Above 50 Lakhs?

The first step towards tax saving is to understand the country's tax structure. At present, there are two tax regimes operational in the country. The taxpayers now have the choice to pick a tax regime that can help them save more money. If you haven’t made any choice, you will be shifted to the new tax regime by default. 

If you want to know how to save tax on a 1 crore salary, this is just for you. 

Latest Update Budget 2024

Finance Bill 2024 has amended the slab rates of the new Income Tax Regime for the FY 2024-25, as follows -

Furthermore, there has been changes in standard deduction and family pension deduction particularly in the new tax regime. There has been an increase in the standard deduction from ₹ 50,000 to ₹ 75,000, and deduction on family pension has also increased from ₹ 15,000 to ₹ 25,000.

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:

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 - New Tax Regime

Here are the points to note under the New Tax Regime if you are a salaried individual having more than Rs 1 crore Salary: 

• Surcharge Rates if income exceeds Rs. 50 lakhs are as follows
  • Taxable income > 50,00,000 = Surcharge 10%
  • Taxable income > 1,00,00,000 = Surcharge 15%
  • Taxable income > 2,00,00,000 = Surcharge 25%
• Health and Education Cess of 4% is applicable on gross tax liability plus surcharge.
• Finance Act 2023 has capped the maximum surcharge limit under the New Tax Regime at 25%, whereas if taxable income exceeds Rs. 5 crores in old tax regime, the surcharge is levied at 37%.

Tax Exemption and Deductions Available under the New Tax Regime

• 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)
• Gifts up to Rs 50,000
• 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 - Old Tax Regime

If you fall above 1 crore tax slab, here is the tax slab under the old regime. Here are few Points to Note 

• Surcharge Rates if income exceeds Rs. 50 lakhs are as follows
  • Taxable income > 50,00,000 = Surcharge 10%
  • Taxable income > 1,00,00,000 = Surcharge 15%
  • Taxable income > 2,00,00,000 = Surcharge 25%
  • Taxable income > 5,00,00,000 = Surcharge 37%
• Once you find your gross payable tax liability, an additional 4% of Health and Education Cess shall also be applicable on gross tax liability plus surcharge.
• The above slab rates are applicable for Individual aged less than 60. For individuals aged between 60-80 basic exemption limit will be Rs. 3,00,000, and For individuals aged more than 80 basic exemption limit will be Rs. 5,00,000 

Tax Exemption And Deductions Available Under The Old Tax Regime

Deductions 

Exemptions:

There are several other deductions and exemptions as well. But this is just to give you a brief idea of the most commonly availed exemptions and deductions.

Example Of Tax Calculation Under New And Old Tax Regime For The Salary Above 1 Crore

Let’s take an example for better understanding: 

Mr. A has a Salary income of Rs.1.2 Crores. 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 1,80,000
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. 55,000

In the above calculation, the tax under the Old Tax Regime is lower than the New Tax Regime. This is due to the deductions and exemptions claimed and allowed under the Old Tax Regime. Careful comparison according to the specific Individual must be made before opting for the appropriate Tax Regime.

Final Word

Now that you are aware of the two operational tax regimes, you can easily do your tax planning for a salary above Rs 1 crore. There are several schemes, especially under the old tax regime, that can help you substantially bring down your tax liability. On the other hand, the multiple slabs under the new regime can help you avail lower tax rates. Make sure to plan everything well in advance so that you do not miss out on tax savings. 

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